0000930413-12-001385.txt : 20120307 0000930413-12-001385.hdr.sgml : 20120307 20120307093319 ACCESSION NUMBER: 0000930413-12-001385 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20111231 FILED AS OF DATE: 20120307 DATE AS OF CHANGE: 20120307 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDUSTRIAL SERVICES OF AMERICA INC /FL CENTRAL INDEX KEY: 0000004187 STANDARD INDUSTRIAL CLASSIFICATION: SANITARY SERVICES [4950] IRS NUMBER: 590172746 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20979 FILM NUMBER: 12672689 BUSINESS ADDRESS: STREET 1: 7100 GRADE LN BLDG 4 STREET 2: P O BOX 32428 CITY: LOUISVILLE STATE: KY ZIP: 40232 BUSINESS PHONE: 5023681661 MAIL ADDRESS: STREET 1: 7100 GRADE LANE BLDG 4 STREET 2: P O BOX 32428 CITY: LOUISVILLE STATE: KY ZIP: 40232 FORMER COMPANY: FORMER CONFORMED NAME: ALSON INDUSTRIES INC DATE OF NAME CHANGE: 19840807 FORMER COMPANY: FORMER CONFORMED NAME: ALSON MANUFACTURING CO INC DATE OF NAME CHANGE: 19700920 10-K 1 c68719_10k.htm


	UNITED STATES SECURITIES AND EXCHANGE COMMISSION
	Washington, DC 20549

	FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934

	For Fiscal Year Ended December 31, 2011

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934

	For the transition period from __________ to __________

	Commission File No.: 0-20979




INDUSTRIAL SERVICES OF AMERICA, INC.
(Exact name of registrant as specified in its charter)


Florida	59-0712746

(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7100 Grade Lane P.O. Box 32428 Louisville, Kentucky (Address of Principal Executive Offices)	40232 (Zip Code)

Registrant’s Telephone Number, Including Area Code: (502) 368-1661

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.0033 par value
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):	Large accelerated filer o	Accelerated filer o
	Non-accelerated filer o	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x

Aggregate market value of the 4,589,593 shares of voting Common Stock held by non-affiliates of the registrant at the closing sales price on June 30, 2011: $48,420,206.

Number of shares of Common Stock, $0.0033 par value, outstanding as of the close of business on March 7, 2012: 6,940,517.




DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for the 2012 Annual Meeting of Shareholders are incorporated by reference into Item 10 through Item 14 of Part III of this report.

PART I


Item 1.	Business.

General

Industrial Services of America, Inc. (herein “ISA,” the “Company,” “we,” “us,” “our,” or other similar terms), is a Louisville, Kentucky-based recycler of stainless steel, ferrous, and non-ferrous scrap and provider of waste services. Although we have two principal business segments, recycling and waste services, we are primarily focusing our attention now and in the future towards our recycling business. The recycling segment collects, purchases, processes and sells stainless steel, ferrous and non-ferrous scrap metal to steel mini-mills, integrated steel makers, foundries and refineries. We purchase ferrous and non-ferrous scrap metal primarily from industrial and commercial generators of steel, iron, aluminum, copper, stainless steel and other metals as well as from scrap dealers and retail customers who deliver these materials directly to our facilities. We process scrap metal through our shredding, sorting, shearing, cutting, and baling operations. Within the recycling segment, our alloys division specializes in the purchasing, processing and sale of stainless steel, nickel-based and high-temperature alloys. Our non-ferrous scrap recycling operations consist primarily of collecting, sorting and processing various grades of copper, aluminum and brass.

The waste services segment provides waste management services including contract negotiations with service providers, centralized billing, invoice auditing and centralized dispatching. Waste services also rents, leases, sells, and services waste handling and recycling equipment.

Although our focus is on the recycling industry, our goal is to remain dedicated to the waste services industry as well, while sustaining steady growth at an acceptable profit, adding to our net worth, and providing positive returns for our stockholders. We intend to increase efficiencies and productivity in our core business while remaining alert for possible acquisitions, strategic partnerships, mergers, and joint-ventures that would enhance our profitability.

Available Information

We make available, free of charge, through our website www.isa-inc.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and amendments to those reports as soon as reasonably practicable after we have electronically filed with the Securities and Exchange Commission. We also make available on our website our audit committee charter, our Business Ethics Policy and Code of Conduct and our Code of Ethics for the CEO, CFO and senior financial officers. Please note that our Internet address is included in this annual report on Form 10-K as an inactive textual reference only. Information contained on our website www.isa-inc.com is not incorporated by reference into this annual report on Form 10-K and should not be considered a part of this report.

ISA Recycling Operating Division

Since October 2005, we have focused much of our attention on our recycling business segment. We sell processed ferrous and non-ferrous scrap material, including stainless steel, to end-users such as steel mini-mills, integrated steel makers and foundries and refineries. We purchase ferrous and non-ferrous scrap material primarily from industrial and commercial generators of steel, iron, aluminum, copper, stainless steel and other metals as well as from other scrap dealers who deliver these materials directly to our facilities. We process these materials by sorting, shearing, cutting, shredding and/or baling. We also remain dedicated to initiating growth in our waste management business segment, which includes management services and waste and recycling equipment sales, service and leasing.

Ferrous Operations

Ferrous Scrap Purchasing - We purchase ferrous scrap from two primary sources: (i) industrial and commercial generators of steel and iron; and (ii) scrap dealers, peddlers, and other generators and collectors who sell us steel and iron scrap, known as obsolete scrap. Market demand and the composition, quality, size and weight of the materials are the primary factors that determine prices paid to these material providers.

Ferrous Scrap Processing - We prepare ferrous scrap material for resale through a variety of methods including sorting, shearing, cutting, shredding and baling. We produce a number of differently sized, shaped and graded products depending upon customer specifications and market demand.


	•	Sorting - After purchasing ferrous scrap material, we inspect it to determine how we should process it to maximize profitability. In some instances, we may sort scrap material and sell it without further processing. We separate scrap material for further processing according to its size, composition and grade by using conveyor systems, front-end loaders, crane-mounted electromagnets and claw-like grapples.

	•	Shearing or Cutting - Pieces of oversized ferrous scrap material, such as obsolete steel girders and used pipe, which are too large for other processing are cut with hand torches, crane-mounted alligator shears or stationary guillotine shears.

	•	Shredding – We shred large pieces of ferrous scrap material, such as automobiles and major appliances, in our shredder by hammer mill action into pieces of a workable size that pass through magnetic separators to separate metal from synthetic foam, fabric, rubber, stone, dirt, etc. The metal we recover from the shredding process we sell directly to customers or reuse in some other metal blend. The substantially non-metallic residue by-product is usually referred to as “automobile shredder residue” (ASR) or “shredder fluff”. We dispose of the non-metal components, which can reduce the volume of the scrap as much as 25.0%, in a landfill. We began using the shredder system July 1, 2009.

	•	Baling - We process light-gauge ferrous materials such as clips, sheet iron and by-products from industrial and commercial processes, such as stampings, clippings and excess trimmings, by baling these materials into large, uniform blocks. We use cranes and conveyors to feed the material into a hydraulic press, which compresses the material into uniform blocks.

Ferrous Scrap Sales - We sell processed ferrous scrap material to end-users such as steel mini-mills, integrated steel makers and foundries, and brokers who aggregate materials for other large users. Most customers purchase processed ferrous scrap material through negotiated spot sales contracts, which establish the quantity purchased for the month and the pricing. The price we charge for ferrous scrap materials depends upon market supply and demand, as well as quality and grade of the scrap material. We deliver all scrap ourselves or using third party carriers via truck, railcar, and/or barge. Some customers choose to send their own delivery trucks. These trucks are weighed and loaded at one of our sites based on the sales order.

Non-Ferrous Operations

Non-Ferrous Scrap Purchasing - We purchase non-ferrous scrap from two primary sources: (i) industrial and commercial non-ferrous scrap material providers who generate or sell waste aluminum, copper, stainless steel, other nickel-bearing metals, brass and other metals; and (ii) peddlers, scrap dealers, generators and collectors who deliver directly to our facilities material that they collect from a variety of sources. We also collect non-ferrous scrap from sources other than those that are delivered directly to our processing facilities by placing retrieval boxes at these sources. We subsequently transport the boxes to our processing facilities.

Non-Ferrous Scrap Processing - We prepare non-ferrous scrap metals, principally aluminum, copper, brass and stainless steel to sell by sorting, shearing, cutting, shredding or baling.


	•	Sorting - Our sorting operations separate and identify non-ferrous scrap by using front-end loaders, grinders, hand torches and spectrometers. Our ability to identify metallurgical composition maximizes margins and profitability. We sort non-ferrous scrap material for further processing according to type, grade, size and chemical composition. Throughout the sorting process, we determine whether the material requires further processing before we sell it.

	•	Shearing or Cutting - Pieces of oversized non-ferrous scrap material, which are too large for other processing methods, are cut with alligator shears.

	•	Shredding – We shred large pieces of nonferrous scrap material, such as steel drums, copper and aluminum cable, tubing, sheet metal, extrusions, and baled aluminum, in our shredder by hammer mill action into pieces of a workable size that pass through magnetic separators to separate metal from synthetic foam, fabric, rubber, stone, dirt, etc. The metal we recover from the shredding process we sell directly to customers or reuse in some other metal blend. We dispose of the non-metal components, which can reduce the volume of the scrap as much as 25.0%, in a landfill. We began using the shredder system July 1, 2009.

	•	Baling - We process non-ferrous metals such as aluminum cans, sheet and siding by baling these materials into large uniform blocks. We use front-end loaders and conveyors to feed the material into a hydraulic press, which compresses the material into uniform blocks.

Non-Ferrous Scrap Sales - We sell processed non-ferrous scrap material to end-users such as foundries, aluminum sheet and ingot manufacturers, copper refineries and smelters, steel mini-mills, integrated steel makers, steel foundries and refineries, and brass and bronze ingot manufacturers. Prices for the majority of non-ferrous scrap materials change based upon the daily publication of spot and futures prices on COMEX or the London Metals Exchange. We deliver all scrap ourselves or using third party carriers via truck, railcar, and/or barge. Some customers choose to send their own delivery trucks. These trucks are weighed and loaded at one of our sites based on the sales order.

Waste Services Operations

Our Waste Services operations are in the business of commercial, retail and industrial waste and recycling management services (operating under the name “commercial waste services” or “CWS”) and commercial and industrial waste and recycling handling equipment sales, rental and maintenance (operating under the name “waste equipment sales and service company” or “WESSCO”). CWS offers a “total package” concept to commercial, retail and industrial customers for their waste and recycling management needs. Combining waste reduction and diversion, and waste equipment technology, CWS creates waste and recycling programs tailored to each customer’s needs. The services we offer include locating and contracting with a hauling company and recycler at a reasonable cost for each participating location. CWS does not own waste-transporting trucks or landfills. We do not operate or partner with any of the national hauling or recycling companies, and none of these companies own us. We are able to maintain a neutral position for the benefit of our customers. We have designed and developed proprietary computer software that provides our personnel with relevant information on each customer’s locations, as well as pertinent information on service providers, disposal rates, costs of equipment, including installation and shipping, disposal rates and recycling prices. This software has allowed us to build a database for serving our customers that have locations nationwide as well as in Canada. This software enables us to generate detailed monthly customized billing reports, and price tracking to accommodate our customers’ needs.

Our commercial waste services division provides our customers evaluation, management, monitoring, auditing, cost reduction and containment of non-hazardous solid waste removal and recycling activities. CWS has an active network of 1,049 hauling, landfill, recycling and equipment manufacturing and maintenance service providers throughout the United States and Canada. Through this network, we are able to provide pricing estimates for current and potential customers. CWS customer service representatives have access to this information through the computer software designed and developed to enhance the value offered to our customers. Through this information retrieval system and database, customer service representatives review and audit the accuracy of recent billings for hauling, landfill and recycling rates.

By offering competitively priced waste and recycling handling equipment from a number of different manufacturers, WESSCO is able to tailor equipment packages for individual customer needs. We do not manufacture any equipment, but we do refurbish, recondition and add options when necessary. We sell, rent and repair all types of industrial and commercial waste and recycling handling equipment such as compactors, balers and containers.

“Total Package” Concept

Our management services division has third party service providers providing timely service for waste removal and recycling services for our customers. Our recycling division purchases ferrous and nonferrous materials, cardboard and paper on a daily basis. The products or services have value to the customer on a standalone basis. These services make up the “total package” concept.

Company Background

ISA was incorporated in October 1953 in Florida under the name Alson Manufacturing, Inc. From the date of incorporation through January 5, 1975, Alson designed and manufactured various forms of electrical products. In 1979, the Board of Directors and the shareholders of Alson commenced liquidation of all the tangible assets of Alson. On October 27, 1983, Harry Kletter, our Chairman of the Board and Chief Executive Officer, acquired 629,250 shares of ISA Common Stock. The existing directors resigned and five new directors were elected.

On July 1, 1984, we began a solid waste handling and disposal equipment sales organization under the name Waste Equipment Sales and Services Company, which we refer to as WESSCO. On January 1, 1985, we merged with Computerized Waste Systems, Inc., a Massachusetts corporation. CWS was a corporation specializing in offering solid waste management consultations for large multi-location companies involved in the retail, restaurant and industrial sectors. At the time of the merger, CWS was concentrating on large retail chains, but has changed its emphasis to include commercial and industrial customers. This strategy created an additional target market for us. Subsequent to the merger with CWS, we moved the CWS headquarters from Springfield, Massachusetts to Louisville, Kentucky. At the time of the merger, much of the customer base

and marketing efforts were concentrated in the Northeast. With the move to Louisville, we began to expand our marketing efforts, which are now nationwide.

On July 1, 1997, we acquired the assets of a non-ferrous scrap metal recycling facility located at 7100 Grade Lane, Louisville, Kentucky, thus expanding our recycling product lines.

In January 1998, we acquired the business of a ferrous scrap and corrugated paper recycling facility located at 7100 Grade Lane, Louisville, Kentucky. This acquisition was the beginning of our ferrous scrap metal, non-ferrous scrap metal and corrugated paper processing segment known as ISA Recycling.

On June 1, 1998, we acquired all of the business, property, rights and assets of a ferrous and non-ferrous scrap metal recycling facility located in North Vernon, Indiana. On July 8, 2002, we acquired a five-acre tract at 1565 East 4^th Street, Seymour Indiana. In the fourth quarter of 2002, we moved our metal recycling facilities from North Vernon, Indiana to Seymour, Indiana.

On February 15, 2005 we leased a location in Lexington, Kentucky. We were using this property as a transfer station for ferrous and nonferrous material. There were no processing operations at this facility. We discontinued operations at this location in the first quarter of 2007 and subleased the location to an unaffiliated party. Both the lease and sublease terminated in the first quarter of 2012. We no longer conduct operations at this site and have no further obligations under the expired lease.

During 2007, we added a location in New Albany, Indiana across the Ohio River from Louisville, Kentucky, the site of our headquarters. We use this property as a transfer station for nonferrous material.

During 2007, we entered into an asset purchase agreement for $1.3 million funded primarily by a note payable to Industrial Logistic Services, LLC, the sole member of which is Brian Donaghy, our president and chief operating officer, whereby we pay $20.0 thousand per month for 60 months for various assets including tractor trailers, trucks and containers. The note payable reflects a seven percent (7.0%) interest payment on the outstanding balance plus principal amortization. We also paid ILS $100.0 thousand cash as a portion of the purchase price at the time of execution of the asset purchase agreement.

During 2008, we added a location near our Grade Lane site. We purchased the former Allied System truck terminal at 6709 Grade Lane. The 20,182 square foot facility sits on a 4.4 acre asphalted parking area. ISA Logistics and WESSCO occupy this property, relocated from the main Louisville location, creating room for the new shredder and related maintenance equipment. In September, 2009, we completed the widening of Grade Lane to three lanes along our property, allowing traffic to move more freely and safely. The road improvements accommodate our growth from the $10.0 million shredder project. The shredder began operations on July, 1, 2009. It shreds ferrous and non ferrous scrap for domestic and international consumers.

In January, 2009, we expanded into the stainless steel and high-temperature alloys recycling business by purchasing inventories from Ventures Metals, LLC for $9.1 million, agreeing to lease its processing equipment and facilities on Camp Ground Road in Louisville, Kentucky and in Mobile, Alabama, and hiring two executives to head up a new ISA Alloys division, both of whom have since left the Company. On April 2, 2009, we completed the acquisition of the Camp Ground Road property consisting of 5.67 acres plus improvements from Luca Investments, LLC, an affiliate of Venture Metals, for a purchase price of $2.1 million, comprised of $1.3 million in cash and 300,000 shares of our common stock, valued at $2.67 per share on April 2, 2009. On April 13, 2009, we concluded the purchase of the fixed assets of Venture Metals, LLC for $1.5 million, less the rental we paid at $15.0 thousand per month from February 11, 2009 through April 2, 2009 for use of the fixed assets.

In March, 2009, we transformed the Camp Ground Road location into a full-service recycling material receiving facility. We use this property as a transfer station for ferrous and nonferrous material. In June 2009, we closed the Mobile, Alabama office.

In September, 2009, we purchased two tracts of real estate on Grade Lane near the current Grade Lane site through the acquisition of all outstanding membership interests in 7124 Grade Lane LLC and 7200 Grade Lane LLC, each a Kentucky limited liability company, owned by Harry Kletter Family Limited Partnership, a Kentucky limited partnership. Mr. Kletter is our chairman and chief executive officer and the general partner of Harry Kletter Family Limited Partnership. One tract (7124 Grade Lane) contains the shredder, and the other tract (7200 Grade Lane) provides a new entrance for the shredder and ISA Alloys. We built new scales on this site, and ISA Alloys uses the space to store inventory. With respect to the purchase of the membership interests in 7200 Grade Lane LLC, we provided to the limited partnership 550,871 shares at $4.27 per share for a

purchase price of $2.3 million and with respect to the purchase of the membership interests in 7124 Grade Lane LLC, we provided to the limited partnership 199,220 shares at $4.27 per share for a purchase price of $850.0 thousand.

In November, 2009, we moved the ISA Alloys division from the Camp Ground Road location to 7100 Grade Lane.

In July, 2010, we purchased certain Venture Metals, LLC intangibles, including the customer list and trade name, and entered into a non-compete agreement to protect our market position.

Industry Background

The waste collection and disposal business in the United States is a multi-billion dollar industry. The size of this industry has increased for the past several years and should continue to increase as landfill space decreases. Although society and industry have developed an increased awareness of environmental issues and recycling has increased, waste production also continues to increase. Because of environmental concerns, new regulations and cost factors, it has become difficult to obtain the necessary permits to build any new landfills. We believe we are in a position to represent the best interest of our customers and find competitive pricing for their waste collection and disposal needs.

In addition to increasing landfill costs, regulatory measures and more stringent control of material bound for disposal are making the management of solid waste an increasingly difficult problem. The United States Environmental Protection Agency is expected to continue the present trend of restricting the amount of potentially recyclable material bound for landfills. Many states have passed, or are contemplating, measures that would require industrial and commercial companies to recycle a minimum percentage of their waste stream and restrict the percentage of recyclable materials in any commercial load of waste material. Many states have already passed restrictive regulations requiring a plan for the reduction of waste or the segregation of recyclable materials from the waste stream at the source. ISA management believes that these restrictions may create additional marketing opportunities as waste disposal needs become more specialized. Some large industrial and commercial companies have hired in-house staff to handle the solid waste management and recycling responsibilities, but have found that without adequate resources and staff support, in-house handling of these responsibilities may not be an effective alternative. We offer these establishments a solution to this increasing burden.

Competition

The metal recycling business is highly competitive and is subject to significant changes in economic and market conditions. At the end of 2011, the American economy was showing cautious signs of improvement in consumer confidence, job creation, manufacturing, housing, and the automobile industry. European economies were not as promising. Metal prices, specifically nickel, dropped significantly in the latter half of the year, hitting lows in late November. Pricing and proximity to a metal source are the major competitive factors in the metal recycling business. We compete for the purchase and sale of scrap metal with large, well-financed recyclers of scrap metal as well as smaller metal facilities and brokers/dealers. Although we continue to expand our facilities and increase our processing efficiencies, including the completion of the shredder system in 2009, certain of our competitors have greater financial, marketing and physical resources. There can be no assurance that we will be able to obtain our desired market share based on the competitive nature of this industry.

On a commercial/industrial waste management level, we have competition from a variety of sources. Much of it is from companies that concentrate their efforts on a regional level and two of the major national waste haulers.

We have faced increased competition from national hauling and recycling companies in recent years. The large national hauling and recycling companies often attempt to handle all locations for a “national chain” customer. This scenario poses a potential conflict of interest since these hauling companies and recyclers can attain greater profitability from increases in hauling and disposal revenues and fluctuations in recycling prices. In addition to having an economic incentive in allowing customers to have more hauls than needed, light loads, and higher hauling and disposal rates, the national hauling companies do not have operations in every community. Therefore, for many cities, hauling companies must obtain bids from local hauling, disposal and recycling companies that may perceive the national haulers to be competitors. We have encountered reluctance from independent hauling and recycling companies to support services in areas not serviced by these national companies. We have positioned ourselves to work with the national and independent haulers and recyclers to efficiently service our customers on a nationwide basis.

Along with positioning ourselves to efficiently service our customers, our management services division methods of competition include offering our clients competitive pricing, superior customer service and industry expertise. We are known for our exemplary service to our clients and timely payments to our vendors. We are able to offer management programs and tailor-made reports for our clients’ specific needs.

There is also competition from some equipment manufacturers and the major waste haulers for management services as well as waste/recycling equipment purchases and rental programs. Prospective customers look for cost justification when procuring management programs and waste or recycling equipment.

Dependence on Major Customer

Sales to North American Stainless, our largest customer, represented approximately 44.4%and 63.8% of our net sales for the years ended December 31, 2011 and 2010, respectively. Our cash flow experiences a significant decline between the time we acquire scrap metal for processing and the time we receive payment for these goods. The loss of North American Stainless as a customer would negatively impact our revenues and profitability and could materially and adversely affect our results of operations and financial condition.

Employees

As of December 31, 2011, we had one hundred seventy-six (176) full-time employees as follows: recycling 93, management services 8, sales/leasing 4, drivers 19, maintenance 17, and administration/information technology 35. None of our employees are a member of a union.

Effect of State and Federal Environmental Regulations

Any environmental regulatory liability relating to our operations is generally borne by the customers with whom we contract and the service providers in their capacity as transporters, disposers and recyclers. Our policy is to use our best efforts to secure indemnification for environmental liability from our customers and service providers. Although we believe that our business model adequately protects us from potential environmental liability, we also continue to use our best efforts to be in compliance with federal, state and local environmental laws, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Hazardous Materials Transportation Act, as amended, the Resource Conservation and Recovery Act, as amended, the Clean Air Act, as amended, and the Clean Water Act. Such compliance has not historically constituted a material expense to us.

The collection and disposal of solid waste and rendering of related environmental services as well as recycling operations and issues are subject to federal, state and local requirements, which regulate health, safety, the environment, zoning and land-use. Federal, state and local regulations vary, but generally govern hauling, disposal and recycling activities and the location and use of facilities and also impose restrictions to prohibit or minimize air and water pollution. In addition, governmental authorities have the power to enforce compliance with these regulations and to obtain injunctions or impose fines in the case of violations, including criminal penalties. The EPA and various other federal, state and local environmental, health and safety agencies and authorities, including the Occupational Safety and Health Administration of the U.S. Department of Labor administer those regulations.

We strive to conduct our operations in compliance with applicable laws and regulations. While such amounts expended in the past or that we anticipate spending in the future have not had and are not expected to have a material adverse effect on our financial condition or operations, the possibility remains that technological, regulatory or enforcement developments, the results of environmental studies or other factors could materially alter this expectation.

Each state in which we operate has its own laws and regulations governing solid waste disposal, water and air pollution and, in most cases, releases and cleanup of hazardous substances and liability for such matters. Several states have enacted laws that will require counties to adopt comprehensive plans to reduce, through waste planning, composting, recycling, or other programs, and the volume of solid waste landfills. Several states have recently enacted these laws. Legislative and regulatory measures to mandate or encourage waste reduction at the source and waste recycling also are under consideration by Congress and the EPA.

Finally, various states have enacted, or are considering enacting, laws that restrict the disposal within the state of solid or hazardous wastes generated outside the state. While courts have declared unconstitutional laws that overtly discriminate against out of state waste, courts have upheld some laws that are less overtly discriminatory. Challenges to other such laws are pending. The outcome of pending litigation and the likelihood that jurisdictions will adopt other such laws that will survive constitutional challenge are uncertain.

ITEM 1A. RISK FACTORS

Risk Factors

This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, certain statements about our plans, strategies and prospects. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that such plans, intentions or expectations will be achieved. Important factors that could cause our actual results to differ materially from our forward-looking statements include those set forth in this Risk Factors section. All forward-looking statements attributable to us or any persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth below. Unless the context requires otherwise, all references to the “company,” “we,” “us” or “our” include Industrial Services of America, Inc. and subsidiaries.

If any of the following risks, or other risks not presently known to us or that we currently believe to not be significant, develop into actual events, then our business, financial condition, results of operations, cash flows or prospects could be materially adversely affected.

Risks Related to Our Operations

Our business has increasing involvement in stainless steel, ferrous, non-ferrous and fiber recycling. Changes in prices, demand, including foreign demand, regulation, economic slowdowns or increased competition could result in a reduction of our revenue and consequent decrease in our common stock price.

The metal recycling business is highly competitive and is subject to significant changes in economic and market conditions. At the end of 2011, the American economy was showing cautious signs of improvement in consumer confidence, job creation, manufacturing, housing, and the automobile industry. European economies were not as promising. Metal prices, specifically nickel, dropped significantly in the latter half of the year, hitting lows in late November. Pricing and proximity to a metal source are the major competitive factors in the metal recycling business. Many companies offer or are engaged in the development of products or the provisions of services that may be or are competitive with our current products or services. Although we continue to expand our facilities and increase our processing efficiencies, including the completion of the shredder system in 2009, certain of our competitors have greater financial, technical, manufacturing, marketing, distribution, assets, and other resources than we possess in the stainless steel, ferrous, non-ferrous and fiber recycling businesses. In addition, the industry is constantly changing as a result of consolidation that may create additional competitive pressures in our business environment. There can be no assurance that we will be able to obtain our desired market share based on the competitive nature of this industry.

Volatility in market prices of our scrap metal recycling inventory may adversely affect our business.

We make certain assumptions regarding future demand and net realizable value in order to assess that we record our stainless steel, ferrous, non-ferrous and fiber recycling inventory properly at the lower of cost or market. We base our assumptions on historical experience, current market conditions and current replacement costs. If the anticipated future selling prices of scrap metal and finished steel products should decline due to the cyclicality of the business or otherwise, we would re-assess the recorded net realizable value of such inventory and make any adjustments we feel necessary in order to reduce the value of such inventory (and increase cost of goods sold) to the lower of cost or market.

An increase in the price of fuel may adversely affect our business.

Our operations are dependent upon fuel, which we generally purchase in the open market on a daily basis. Direct fuel costs include the cost of fuel and other petroleum-based products used to operate our shredder, fleet of cranes and heavy equipment. We are also susceptible to increases in indirect fuel costs which include fuel surcharges from vendors. During 2007 and 2008, we experienced increases in the cost of fuel and other petroleum-based products, although these prices decreased in later 2008 and 2009. A portion of these increases we passed on to our customers. However, because of the competitive nature of the industry, there can be no assurance that we will be able to pass on current or future increases in fuel prices to our customers. Fuel costs increased in 2011 compared to 2010, and predictions are mixed for 2012. Due to geopolitical events, fuel prices have remained elevated and may increase again throughout 2012. A significant increase in fuel costs could adversely affect our business.

We could incur substantial costs in order to comply with, or to address any violations under, environmental laws that could significantly increase our operating expenses and reduce our operating income.

Our operations are subject to various environmental statutes and regulations, including laws and regulations addressing materials used in the processing of our products. In addition, certain of our operations are subject to federal, state and local environmental laws and regulations that impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous wastes. Failure to maintain or achieve compliance with these laws and regulations or with the permits required for our operations could result in substantial operating costs and capital expenditures, in addition to fines and civil or criminal sanctions, third party claims for property damage or personal injury, cleanup costs or temporary or permanent discontinuance of operations. Certain of our facilities have been in operation for many years and, over time, we and other predecessor operators of these facilities have generated, used, handled and disposed of hazardous and other regulated wastes. Environmental liabilities could exist, including cleanup obligations at these facilities or at off-site locations where we disposed of materials from our operations, which could result in future expenditures that we cannot currently quantify and which could reduce our profits.

Our financial statements are based upon estimates and assumptions that may differ from actual results.

We have prepared our financial statements in accordance with U.S. generally accepted accounting principles and necessarily include amounts based on estimates and assumptions we made. Actual results could differ from these amounts. Significant items subject to such estimates and assumptions include the carrying value of long-lived assets, valuation allowances for accounts receivable, lower of cost or market, liabilities for potential litigation, claims and assessments, and liabilities for environmental remediation and deferred taxes.

We depend on our senior management team and the loss of any member could prevent us from implementing our business strategy.

Our success is dependent on the management and leadership skills of our senior management team. We have entered into employment agreements with three of our executives. The loss of any members of our management team or the failure to attract and retain additional qualified personnel could prevent us from implementing our business strategy and continuing to grow our business at a rate necessary to maintain future profitability.

The concentration of our customers could have a material adverse effect on our results of operations and financial condition.

Sales to North American Stainless, our largest customer, represented approximately 44.4% and 63.8% of our net sales for the years ended December 31, 2011 and 2010, respectively. Our cash flow experiences a significant decline between the time we acquire scrap metal for processing and the time we receive payment for these goods. The loss of this or other significant customers or our inability to collect accounts receivable would negatively impact our revenues and profitability and could materially and adversely affect our results of operations and financial condition.

Our exposure to credit risk could have a material adverse effect on our results of operations and financial condition.

Our business is subject to the risks of nonpayment and nonperformance by our customers. Downturns in the economy in 2008 led to bankruptcy filings by many of our customers, which caused us to recognize additional allowances for doubtful accounts receivable in previous years. While we believe our allowance for doubtful accounts is adequate, changes in economic conditions or any weakness in the steel and metals industries could cause potential credit losses from our significant customers, which could adversely impact our future earnings or financial condition.

Our debt may increase our vulnerability to economic or business downturns.

We are vulnerable to higher interest rates because interest expense on certain of our borrowings is based on margins over a variable base rate. We may experience material increases in our interest expense as a result of increases in general interest rate levels. If we were to breach covenants in our lending facilities, our lenders could exercise their remedies related to any material breaches, including acceleration of our payments and taking action with respect to their loan security. For the year ending December 31, 2011, we were not in compliance with two of our debt covenants. We received a waiver from the bank for failing to meet these requirements as of December 31, 2011. We cannot ensure that the bank would provide additional waivers if we are not in compliance with our debt covenants in the future.

From time to time, we have relied upon and will rely on borrowings under various credit facilities and from other lenders to operate our business. However, the recent financial crisis has adversely affected many financial institutions and, as a result,

such financial institutions have ceased or reduced the amount of lending they have made available to their customers. As a result, we may not have the ability to borrow from other lenders to operate our business.

Seasonal changes may adversely affect our business and operations.

Our operations may be adversely affected by periods of inclement weather, which could decrease the collection and shipment volume of recycling materials.

Risks Related to Our Common Stock

Future sales of our common stock could depress our market price and diminish the value of your investment.

Future sales of shares of our common stock could adversely affect the prevailing market price of our common stock. If our existing shareholders sell a large number of shares, or if we issue a large number of shares, the market price of our common stock could significantly decline. Moreover, the perception in the public market that our existing shareholders and in particular members of the Kletter family might sell shares of common stock could depress the market for our common stock.

The market price for our common stock may be volatile.

In recent periods, there has been volatility in the market price for our common stock. In addition, the market price of our common stock could fluctuate substantially in the future in response to a number of factors, including the following:


	--	Our quarterly operating results or the operating results of our companies in the waste management or ferrous, non-ferrous and fiber recycling industry;

	--	Changes in general conditions in the economy, the financial markets or the ferrous, non-ferrous and fiber recycling industry;

	--	Loss of significant customers and

	--	Increases in materials and other costs.

In addition, in recent years the stock market has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated to their operating performance. These broad market fluctuations may materially adversely affect our stock price, regardless of our operating results.


Item 2.	Properties.

The following table outlines our principle properties:


Property Address	Lease or own	Segment	Acreage

6709 Grade Lane, Louisville, KY	Own	Recycling	4.491
7021-7103 Grade Lane, Louisville, KY	Own	Recycling	2.530
7020/7100 Grade Lane, Louisville, KY	Lease (K&R) (1)	Recycling, Waste Services, and Other	14.23
7110 Grade Lane, Louisville, KY	Own	Recycling	10.723
7124 Grade Lane, Louisville, KY	Own	Recycling	5.120
7017 Grade Lane, Louisville, KY	Own	Recycling	1.501
7200-7210 Grade Lane, Louisville, KY	Own	Recycling	15.52
3409 Camp Ground Road, Louisville, KY	Own	Recycling	5.670
1565 E. 4^th Street, Seymour, IN	Own	Recycling	5.003
1617 State Road 111, New Albany, IN	Own	Recycling	1.300

(1)

On February 16, 1998 our Board of Directors ratified and formalized an existing relationship in connection with our leasing of facilities from K&R, LLC. K&R is our affiliate because our Chief Executive Officer and principal shareholder, Harry Kletter, owns 100.0% of K&R. The rent beginning January 1, 2008 became $582.0 thousand per annum, payable at the beginning of each month in an amount equal to $48.5 thousand. This fixed minimum rent adjusts each five years, including for each of the option periods, in accordance with the consumer price index. The

fixed minimum rent also increases to $750.0 thousand per annum, in an amount equal to $62.5 thousand per month in the event of our change in control. We must pay, as additional rent, all real estate taxes, insurance, utilities, maintenance and repairs, replacements (including replacement of roofs if necessary) and other expenses. Under the lease, we must also cover any damages arising out of our use of the leased property, unless such damages are caused by K&R’s negligence. In an addendum to the K&R lease as of January 1, 2005, the rent was increased $4.0 thousand as a result of the improvements made to the property in 2004. For years 2005 through 2011, the payments to K&R by the Company of $4.0 thousand for additional rent and the monthly payment from K&R to the Company of $3.9 thousand for a promissory note were offset.

These properties total 66.088 acres, which provides adequate space necessary to perform administrative and retail operation processes and store inventory. All facilities are well-maintained and insured. We do not expect any major land or building additions will be needed to increase capacity for our operations in the foreseeable future.

Lease and Sublease Agreements – Lexington

We subleased the Lexington property to an unaffiliated party for a term that commenced March 1, 2007 and ended January 31, 2012 for $4.5 thousand per month. We leased this property from an unrelated party for $4.5 thousand per month; the lease terminated February 10, 2012.

Property Purchase – Camp Ground Road, Louisville, Kentucky

On January 13, 2009, we entered into an inventory purchase agreement with Venture Metals, LLC, one of the terms of which provided us with the right to retain the use of the property located at 3409 Camp Ground Road, Louisville, Kentucky, for a period not to exceed two years for a monthly rental of $15.0 thousand. The property consists of 5.67 acres with a 7,875 square foot building. In March 2009, we transformed the Camp Ground Road location into a full-service recycling material receiving facility. We purchased this property on April 2, 2009.

Property Purchase – Grade Lane, Louisville, Kentucky

On September 10, 2009 we completed the acquisition of all outstanding membership interests in 7124 Grade Lane LLC and 7200 Grade Lane LLC, each a Kentucky limited liability company, owned by Harry Kletter Family Limited Partnership, a Kentucky limited partnership. Mr. Kletter is our chairman and chief executive officer and the general partner of Harry Kletter Family Limited Partnership.

7124 Grade Lane LLC and 7200 Grade Lane LLC own properties at 7124 Grade Lane and 7200 Grade Lane, Louisville, Kentucky, respectively. Prior to the consummation of the acquisition of the interests in the limited liability companies on September 10, 2009, Harry Kletter Family Limited Partnership owned all the membership interests in each of 7124 Grade Lane LLC and 7200 Grade Lane LLC. We acquired these membership interests, and in effect the properties, due to their strategic location adjacent to 7100 Grade Lane, Louisville, Kentucky where we have our principal operations and headquarters and recently completed the construction of a new shredder system and part of the installation rests on the property.

The transaction received approval of our audit committee, a disinterested majority of our board of directors, and a majority of the outstanding shares of our common stock by written consent, excluding the shares owned by Mr. Kletter.

Item 3. Legal Proceedings.

On January 4, 2007, Lennox Industries, Inc., a commercial heating and air-conditioning manufacturer, filed a suit against us captioned Lennox Industries, Inc. v. Industrial Services of America, Inc., Case No. CV-2007-004, in the Arkansas County, Arkansas Circuit Court in Stuttgart, Arkansas. Lennox in its Second Amended Complaint alleged breach of contract, negligence, and breach of fiduciary duty arising from our alleged miscategorization of Lennox’s scrap metal and mismanagement of the scrap metal recycling operations at three Lennox plants during the contract period April 18, 2001 through termination on November 17, 2005. Both compensatory and punitive damages were sought by Lennox.

A jury trial was held from June 20-24, 2011. The punitive damage claim was withdrawn by Lennox at the conclusion of its case, and Lennox claimed over $1.0 million in compensatory damages. On June 24, the jury found in ISA’s favor on five of the six claims. Lennox was awarded $175.0 thousand on the remaining claim.

No appeal was taken by either party, and a Mutual General Release was signed as part of a final negotiated settlement in which Lennox received $84.5 thousand. A Satisfaction of Judgment was filed with the court on December 28, 2011, and the case is closed.

We have litigation from time to time, including employment-related claims, none of which we currently believe to be material.


Item 4.	Mine Safety Disclosures.

Not applicable.

PART II


Item 5.	Market for ISA’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Effective August 29, 1996, the $0.0033 par value ISA common stock became listed on the Small Cap Market (the “Small Cap Market”) of the NASDAQ Stock Market under the symbol “IDSA.” On May 3, 2010, the Board of Directors declared a 3-for-2 stock split effected by a 50% stock dividend. The stock dividend was issued to holders of record as of May 17, 2010, and paid June 1, 2010. All share numbers and prices in this Form 10-K have been adjusted to reflect the impact of this stock split. High and low sales price of the common stock price is summarized as follows:


Quarter Ended	2011				2010				2009

	High		Low		High		Low		High		Low

March 31	$	14.48	$	9.83	$	11.93	$	6.20	$	5.19	$	2.40
June 30	$	13.02	$	9.26	$	15.27	$	9.23	$	4.77	$	2.47
September 30	$	11.30	$	5.55	$	21.18	$	10.00	$	6.02	$	4.04
December 31	$	6.77	$	4.03	$	16.55	$	9.61	$	7.89	$	5.47

There were approximately 170 shareholders of record as of December 31, 2011.

Our Board of Directors did not declare any dividends in 2010 or 2011.

Under our loan agreement with Fifth Third Bank, ISA may make restricted payments constituting dividends if, and to the extent, that each of the following conditions has been met (i) our Board of Directors has approved them; (ii) such restricted payments made in any fiscal year do not exceed $750.0 thousand; (iii) if, after giving effect to such restricted payments, revolving loan availability is equal to or greater than an aggregate amount equal to $1.0 million; (iv) after giving effect to the proposed restricted payments, no default or event of default has occurred and is continuing as of the date such restricted payment occurs, and (v) ISA is in compliance with the financial covenants on a pro forma basis, after giving effect to such restricted payment.

On November 15, 2005, our Board of Directors authorized a program to repurchase up to 300,000 shares of our common stock at current market prices. We did not repurchase any shares in 2011 or 2010.

Unregistered sales of equity securities and use of proceeds

The following sales of unregistered securities occurred during the fiscal years ended December 31, 2011 and 2010:

On July 1, 2010, we issued 300,000 shares of our common stock to Venture Metals, LLC (“Venture”), a company owned by Messers. Jones and Valentine, employees at the time of the transaction, in exchange for the Venture customer list and name, Venture’s execution of a non-compete agreement, and Venture’s agreement to cause Mr. Jones and Mr. Valentine to provide the company with non-compete agreements. In the agreement relating to the purchase of the Venture customer list, the Venture name, and the noncompete agreements, we agreed to issue additional shares to Messers. Jones and Valentine if the Venture division of our business achieved certain specified targets in fiscal year 2010. Because we met these targets, we issued another 90,000 shares of our common stock to Messers. Jones and Valentine on February 24, 2011. The issuances of shares to Venture and Messers. Jones and Valentine were exempt under Section 4(2) of the Securities Act of 1933, as amended, because they: (1) did not involve a public offering and were made without general solicitation or advertising; and (2) Venture previously represented to us that it is an “accredited investor”, and that the securities were acquired for investment purposes only and not with a view to, or for resale in connection with, any distribution thereof.


Item 6.	Selected Financial Data.

Selected Financial Data


(Amounts in thousands, except per share data)
Year ended December 31:	2011			2010		2009		2008		2007

Total revenue	$	276,870		$	343,005	$	181,052	$	100,042	$	76,956


Net (loss) income	$	(3,881	)	$	8,053	$	5,285	$	1,528	$	2,564


Earnings (loss) per common share:
Basic	$	(0.56	)	$	1.22	$	0.91	$	0.28	$	0.47


Diluted	$	(0.56	)	$	1.21	$	0.91	$	0.28	$	0.47


Cash dividends declared per common share	$	—		$	—	$	—	$	0.0667	$	0.0667


At year end:
Total assets	$	80,970		$	106,162	$	66,674	$	28,791	$	26,285


Long term debt and capital lease obligations, net of current maturities	$	26,688		$	43,623	$	16,654	$	8,531	$	8,495

In 2009, ISA expanded into the stainless steel and high-temperature alloys recycling business by acquiring certain operating assets and hiring key employees. ISA also began our shredder operations in mid-2009. These events increased our revenues by expanding our sales and improving our product efficiencies. In 2011, the price of nickel, the key metal in stainless steel blends, decreased in the second quarter, reaching its low in November. Demand for stainless steel also decreased. In response to these conditions, we made an adjustment of $3.4 million in the third quarter to lower our inventory value to lower of cost or market. These events negatively affected our sales and net income in 2011.


Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation.

The following discussion and analysis should be read in conjunction with the information set forth under Item 6, “Selected Financial Data” and our consolidated financial statements and the accompanying notes thereto included elsewhere in this report.

The following discussion and analysis contains certain financial predictions, forecasts and projections which constitute “forward-looking statements” within the meaning of the federal securities laws. Actual results could differ materially from those financial predictions, forecasts and projections and there can be no assurance that we will achieve such financial predictions, forecasts and projections. Please see Item 1A, “Risk Factors” for items that could affect our financial predictions, forecasts and projections.

General

We are primarily focusing our attention now and in the future towards our recycling business segment. We sell processed ferrous and non-ferrous scrap material to end-users such as steel mini-mills, integrated steel makers, foundries and refineries. We purchase ferrous and non-ferrous scrap material primarily from industrial and commercial generators of steel, iron, aluminum, copper, stainless steel and other metals as well as from other scrap dealers who deliver these materials directly to our facilities. We process these materials by sorting, shearing, shredding, cutting and/or baling. We will also continue to focus on initiating growth in our management services business segment and our waste and recycling equipment sales, service and leasing division.

In 2009, we expanded into the stainless steel recycling market for super alloys and high temperature metals by purchasing inventories and related equipment from Venture Metals, LLC and hiring two of its key executives. We buy and sell stainless steel and high-temperature alloys to steel mills like North American Stainless, our primary customer. The Venture

Metals asset purchase is the latest in a series of actions we have undertaken to position ourselves for strategic growth. The multi-million-dollar shredder project, completed in June 2009, expands our processing capacity, offers specialty grades of scrap and improves end-product quality. The shredder began operations on July 1, 2009. In the last quarter of 2009, we improved the Grade Lane location and added a new entrance for our ISA Alloys operations, which we moved from the Camp Ground Road location to 7100 Grade Lane in November 2009. In July 2010, we purchased certain Venture Metals, LLC intangibles, including the customer list and trade name, and entered into a non-compete agreement to protect our market position.

We continue to pursue a growth strategy in the waste management services arena by adding new locations of existing customers as well as marketing our services to potential customers. Currently, we service approximately 900 customer locations throughout the United States and Canada and we utilize an active database of over 7,000 vendors to provide timely, thorough and cost-effective service to our customers.

Although our focus is principally on the recycling industry, our goal is to remain dedicated to the recycling, management services, and equipment industry as well, while sustaining steady growth at an acceptable profit, adding to our net worth, and providing positive returns for stockholders. We intend to increase efficiencies and productivity in our core business while remaining alert for possible acquisitions, strategic partnerships, mergers and joint-ventures that would enhance our profitability.

We have operating locations in Louisville, Kentucky, and Seymour and New Albany, Indiana. We do not have operating locations outside the United States.

Liquidity and Capital Resources

As of December 31, 2011, we held cash and cash equivalents of $2.3 million. We maintain a cash account on deposit with BB&T which serves as collateral for our swap agreements. As of December 31, 2011, the balance in this account was $653.1 thousand. Other than this balance, our cash accounts are available to us without restriction.

On March 2, 2012, Industrial Services of America, Inc. and ISA Indiana, Inc. (the “Companies”) entered into a Third Amendment to Credit Agreement (the “Third Amendment”) with Fifth Third Bank (the “Bank”) which amended the July 30, 2010 Credit Agreement (the “Credit Agreement”), including the First Amendment to Credit Agreement dated as of April 14, 2011 (the “April Amendment”) and the Second Amendment to Credit Agreement dated as of November 16, 2011 (the “November Amendment”), as follows. The Third Amendment redefines the calculation period for the purpose of measuring compliance with our covenants to maintain a ratio of debt to adjusted EBITDA (the “Senior Leverage Ratio”) and a ratio of adjusted EBITDA to aggregate cash payments of interest expense and scheduled payment of principal of not more than 1.20 to 1 (the “Fixed Charge Coverage Ratio”) such that each ratio will be calculated quarterly for the period beginning January 1, 2012 through the end of each quarter of 2012. Prior to the Third Amendment, the ratios were calculated on a rolling 12 month basis. The Third Amendment also changed the Senior Leverage Ratio from 3.5 to 1 in the original Credit Agreement to (i) 4.25 to 1 in the first quarter of 2012, (ii) 3.50 to 1 in the second and third quarter of 2012, and (iii) 3.25 to 1 in the fourth quarter of 2012 and thereafter. The Third Amendment also increased the unused line fee by 0.25% to 0.75% and provided a waiver of the Senior Leverage Ratio and Fixed Charge Coverage Ratio covenant defaults for the quarter ending December 31, 2011, as discussed below. In addition, the Companies also agreed to perform other customary commitments and pay a fee of $10.0 thousand to the Bank.

On April 14, 2011, we entered into the April Amendment with the Bank which amends the Credit Agreement between the Company and the Bank as follows: The April Amendment (i) increased the maximum revolving commitment and the maximum amount of eligible inventory advances in the calculation of the borrowing base, (ii) changed the due date of the first excess cash flow payment to April 30, 2012, and (iii) amended certain other provisions of the Credit Agreement and certain of the other loan documents.

On December 6, 2011, we entered into the November Amendment with the Bank which amends the Credit Agreement, as amended by the April Amendment described above. Under the April Amendment, the Company was permitted to borrow the lesser of $45.0 million (the “Maximum Revolving Commitment”) or the borrowing base, consisting of the sum of 85% of eligible accounts plus 60% of eligible inventory up to $18.0 million. Under the November Amendment, the Maximum Revolving Commitment was reduced to $40.0 million. In addition, the Company agreed to perform other customary commitments.

Under the original Credit Agreement, we were permitted to borrow via a revolving credit facility the lesser of $40.0 million or the borrowing base, consisting of the sum of 85% of eligible accounts plus 60% of eligible inventory up to $17.0 million. Eligible accounts are generally those receivables that are less than 90 days from the invoice date. As security for the revolving credit facility, we provided the Bank a first priority security interest in the accounts receivable from most of our customers and in our inventory. We also cross collateralized the revolving line of credit with an $8.8 million term loan, entered into to replace several notes payable with another bank. Proceeds of the original revolving credit facility in the amount of $33.4 million were used to repay the outstanding principal balance of the prior obligations with another bank. We used additional proceeds of the revolving credit facility to pay closing costs and for funding temporary fluctuations in accounts receivable of most of our customers and inventory.

With respect to the revolving credit facility, the interest rate is one month LIBOR plus two hundred fifty basis points (2.50%) per annum, adjusted monthly on the first day of each month. As of December 31, 2011, the interest rate was 3.125%. We also paid a fee of 0.50% on the unused portion. The revolving credit facility expires on July 31, 2013. As of December 31, 2011, the outstanding balance on the revolving line of credit was $20.1 million.

The $8.8 million term loan provides for an interest rate that is the same as the interest rate for the revolving credit facility. Principal and interest is payable monthly in consecutive equal installments of $105.0 thousand. The first such payment commenced September 1, 2010 and the final payment of the then-unpaid balance becomes due and payable in full on July 31, 2013. In addition, beginning April 30, 2012 (or, if earlier, upon completion of the Company’s financial statements for the fiscal year ending December 31, 2011), we will make an annual payment equal to 25% of (i) our adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”), minus (ii) our aggregate cash payments of interest expense and scheduled payments of principal (including any prepayments of the term loan), minus (iii) any non-financed capital expenditures, in each case for the Company’s prior fiscal year. Any such payments will be applied to remaining installments of principal under the term loan in the inverse order of maturity, and to accrued but unpaid interest thereon. As security for the term loan, we provided the Bank a first priority security interest in all equipment other than the rental fleet that we own. As of December 31, 2011, the outstanding balance on the term loan was $7.0 million.

In addition, we provided a first mortgage on the property at the following locations: 3409 Campground Road, 6709, 7023, 7025, 7101, 7103, 7110, 7124, 7200 and 7210 Grade Lane, Louisville Kentucky, 1565 East Fourth Street, Seymour, Indiana and 1617 State Road 111, New Albany, Indiana. The Company also cross collateralized the term loan with the revolving credit facility and all other existing debt the Company owes to the Bank.

In our Credit Agreement with the Bank, we agreed to certain covenants, including (i) maintenance of a ratio of debt to adjusted EBITDA for the preceding 12 months of not more than 3.5 to 1 (or, if measured as of December 31 of any fiscal year, 4.0 to 1), (ii) maintenance of a ratio of adjusted EBITDA for the preceding twelve months to aggregate cash payments of interest expense and scheduled payment of principal in the preceding 12 months of not less than 1.20 to 1, and (iii) a limitation on capital expenditures of $4.0 million in any fiscal year. As of December 31, 2011, we were not in compliance with the covenants set forth under (i) and (ii) above. As of December 31, 2011, our ratio of debt to adjusted EBITDA was 9.31; our ratio of adjusted EBITDA to aggregate cash payments of interest expense and scheduled principal payments was (0.70), and our capital expenditures totaled $2.5 million, which includes $36.6 thousand in deposits on equipment. In connection with the Third Amendment, we received a waiver from the Bank for failing to meet the covenants as of December 31, 2011. The Third Amendment also provides that the Senior Leverage Ratio will increase to 4.25 to 1 for the period ending March 31, 2012. The Senior Leverage Ratio will then decrease to 3.5 to 1 for the periods ending June 30 and September 30, 2012 and decrease to 3.25 to 1 for the period ending December 31, 2012 and thereafter. The other covenants will remain the same going forward. As of December 31, 2011, we have $19.9 million under our existing credit facilities that we can use based on the bank waiver received.

On April 12, 2011, we entered into a Loan and Security Agreement with Fifth Third Bank (the “Bank”) pursuant to which the Bank agreed to provide the Company with a Promissory Note (the “Note”) in the amount of $226.9 thousand for the purpose of purchasing operating equipment. The interest rate is five and 68/100 percent (5.68%). Principal and interest is payable in 48 equal monthly installments of $5.3 thousand, each due on the 20th day of each calendar month. Payments commenced on the 20th day of May, 2011, and the entire unpaid principal amount hereof, together with all accrued and unpaid interest, charges, fees or other advances, if any, come due on or before April 20, 2015. As security for the Note, we have granted the Bank a first priority security interest in the equipment purchased with the proceeds of the Note. As of December 31, 2011, the outstanding balance of this loan was $187.1 thousand.

On August 9, 2011, we entered into a Loan and Security Agreement (the “August Agreement”) with the Bank pursuant to which the Bank agreed to loan the Company funds pursuant to a Promissory Note (the “August Note”) in the amount of $115.0 thousand for the purpose of purchasing operating equipment. The interest rate is 5.95%. Principal and interest is payable in 48 equal monthly installments of $2.7 thousand. The first such payment commenced on September 12, 2011, and the entire unpaid principal amount, together with all accrued and unpaid interest, charges, fees or other advances, if any, becomes due no later than August 12, 2015. As security for the August Note, we have granted the Bank a first priority security interest in the equipment purchased with the proceeds of the Note. As of December 31, 2011, the outstanding balance of this loan was $106.4 thousand.

On October 19, 2010, we entered into a Promissory Note (the “October Note”) with the Bank in the amount of $1.3 million for the purpose of purchasing equipment. The interest rate is equal to five and 20/100 percent (5.20%) per annum. Principal and interest is payable monthly in consecutive equal installments of $30.5 thousand with the first such payment commencing November 15, 2010, and the final unpaid principal amount due, together with all accrued and unpaid interest, charges, fees, or other advances, if any, to be paid on October 15, 2014. As security for the October Note, we provided Fifth Third Bank a first priority security interest in the equipment purchased with the proceeds. As of December 31, 2011, the outstanding balance on the Note was $962.4 thousand.

On August 2, 2007, we entered into an asset purchase agreement for $1.3 million funded primarily by a note payable to ILS, the sole member of which is Brian Donaghy, our president and chief operating officer, whereby we pay $20.0 thousand per month for 60 months for various assets including tractor trailers, trucks and containers. The note payable reflects a seven percent (7.0%) interest payment on the outstanding balance plus principal amortization. We also paid ILS $100.0 thousand cash as a portion of the purchase price at the time of execution of the asset purchase agreement. We recorded a note payable of $1.0 million with an outstanding balance at December 31, 2011 of $155.9 thousand.

During 2011, we paid $2.5 million for improvements, property and equipment. We paid $692.0 thousand for land, road, and building improvements. In the recycling segment we paid $1.0 million for cranes, balers, scales, trucks, containers, and other operating equipment and repairs. In the equipment sales, leasing and service segment, we purchased $340.8 thousand in

rental equipment that we located at customer sites. This rental fleet equipment consists of solid waste handling and recycling equipment such as compactors, waste edge monitors, balers, and carts. It is our intention to continue to pursue this market. We purchased $167.7 thousand in office furniture, equipment, and software, and we purchased and upgraded vehicles for $251.8 thousand. We paid deposits of $36.6 thousand on machinery and equipment.

We expect that existing cash flow from operations and available credit under our existing credit facilities will be sufficient to meet our cash needs for the next year and beyond, assuming compliance with the covenants in our Credit Agreement or continued waivers thereof. See “Financial condition at December 31, 2011 compared to December 31, 2010” section for additional discussion and details relating to cash flow from operating, investing, and financing activities. We do not have any material capital expenditure commitments as of December 31, 2011.

Critical Accounting Policies

In preparing financial statements in conformity with accounting principles generally accepted in the United States, we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. We believe that we consistently apply judgments and estimates and that such consistent application results in financial statements and accompanying notes that fairly represent all periods presented. However, any errors in these judgments and estimates may have a material impact on our statement of operations and financial condition. Critical accounting policies, as defined by the Securities and Exchange Commission, are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult and subjective judgments and estimates of matters that are inherently uncertain.

Estimates

In preparing the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America, management must make estimates and assumptions. These estimates and assumptions affect the amounts reported for assets, liabilities, revenues and expenses, as well as affecting the disclosures provided. Examples of estimates include the allowance for doubtful accounts, estimates associated with annual goodwill impairment tests, and estimates of deferred income tax and liabilities. The Company also uses estimates when assessing fair values of assets and liabilities acquired in business acquisitions as well as any fair value and any related impairment charges related to the carrying value of machinery and equipment, and other long-lived assets. Despite the Company’s intention to establish accurate estimates and use reasonable assumptions, actual results may differ from these estimates.

Revenue recognition

We recognize revenues from processed ferrous and non-ferrous scrap metal sales when title passes to the customer, which generally is upon delivery of the related materials. We recognize revenues from services as the service is performed. We accrue sales adjustments related to price and weight differences and allowances for uncollectible receivables against revenues as incurred.

Fair Value of Financial Instruments

We estimate the fair value of our financial instruments using relevant market information and other assumptions. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, prepayments and other factors. Changes in assumptions or market conditions could significantly affect these estimates. As of December 31, 2011, the estimated fair value of our financial instruments approximated book value. The fair value of our debt approximates its carrying value because the majority of our debt bears a floating rate of interest based on the LIBOR rate. There is no readily available market by which to determine fair market value of our fixed term debt; however, based on existing interest rates and prevailing rates as of each year end, we have determined that the fair value of our fixed rate debt approximates book value.

We carry certain of our financial assets and liabilities at fair value on a recurring basis. These financial assets and liabilities are composed of trading account assets and various types of derivative instruments. In addition, we measure certain assets, such as goodwill and other long-lived assets, at fair value on a non-recurring basis to evaluate those assets for potential impairment. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

In accordance with the applicable accounting standards, we categorize our financial assets and liabilities into the following fair value hierarchy:

Level 1 – Financial assets and liabilities with values based on unadjusted quoted prices for identical assets or liabilities in an active market. Examples of level 1 financial instruments include active exchange-traded equity securities and certain U.S. government securities.

Level 2 – Financial assets and liabilities with values based on quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. Examples of level 2 financial instruments include commercial paper purchased from the State Street-administered asset-backed commercial paper conduits, various types of interest-rate derivative instruments, and various types of fixed-income investment securities. Pricing models are utilized to estimate fair value for certain financial assets and liabilities categorized in level 2.

Level 3 – Financial assets and liabilities with values based on prices or valuation techniques that require inputs that are both unobservable in the market and significant to the overall fair value measurement. These inputs reflect management’s judgment about the assumptions that a market participant would use in pricing the asset or liability, and are based on the best available information, some of which is internally developed. Examples of level 3 financial instruments include certain corporate debt with little or no market activity and a resulting lack of price transparency.

When determining the fair value measurements for financial assets and liabilities carried at fair value on a recurring basis, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability. When possible, we look to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, we look to market observable data for similar assets and liabilities. Nevertheless, certain assets and liabilities are not actively traded in observable markets, and we use alternative valuation techniques to derive fair value measurements.

We use the fair value methodology outlined in the related accounting standard to value the assets and liabilities for cash, debt and derivatives. All of our cash is defined as Level 1 and all our debt and derivative contracts are defined as Level 2. In accordance with this guidance, the following table represents our fair value hierarchy for financial instruments, in thousands, at December 31, 2011 and December 31, 2010:


2011:	Level 1		Level 2			Level 3		Total

Assets:
Cash and cash equivalents	$	2,267	$	—		$	—	$	2,267
Goodwill		—		—			6,840		6,840
Net intangible assets		—		—			5,025		5,025

Liabilities
Long term debt	$	—	$	(28,509	)	$	—	$	(28,509	)
Derivative contract		—		(484	)		—		(484	)

2010:	Level 1		Level 2			Level 3		Total

Assets:
Cash and cash equivalents	$	2,468	$	—		$	—	$	2,468
Goodwill		—		—			6,840		6,840
Net intangible assets		—		—			5,775		5,775

Liabilities
Long term debt	$	—	$	(45,447	)	$	—	$	(45,447	)
Derivative contract		—		(650	)		—		(650	)

We have had no transfers in or out of Levels 1 or 2 fair value measurements. Other than standard amortization of intangible assets, we have had no activity in Level 3 fair value measurements for the year ending December 31, 2011. For Level 3 assets, goodwill of $6.8 million is subject to impairment analysis each year end under Phase I of the ASC guidance. No impairment was recorded as of December 31, 2011, as determined by a third party evaluation. See also Note 13 – “Purchase of Inventory, Fixed Assets, and Intangible Assets of Venture Metals, LLC” for additional information on the third party valuation.

Accounts receivable and allowance for doubtful accounts receivable

Accounts receivable consist primarily of amounts due from customers from product and brokered sales. The allowance for doubtful accounts receivable totaled $100.0 thousand at December 31, 2011 and December 31, 2010. Our determination of the allowance for doubtful accounts receivable includes a number of factors, including the age of the balance, past experience with the customer account, changes in collection patterns and general industry conditions and overall economic conditions impacting industry and customers.

Potential credit losses from our significant customers could adversely affect our results of operations or financial condition. General weakness in the steel and metals sectors in the past led to bankruptcy filings by many of our customers, which caused us to recognize additional allowances for doubtful accounts receivable. While we believe our allowance for doubtful accounts is adequate, changes in economic conditions or any weakness in the steel and metals industries could adversely impact our future earnings.

Inventory

Our inventories primarily consist of stainless steel, ferrous and non-ferrous scrap metals that we value at the lower of average purchased cost or market. We also carry replacement parts in inventory, which we depreciate over a one-year life as these parts are used within a one-year period due to the high-volume and intensity of the shredder process. We determine quantities of inventories based on our inventory systems, which are subject to periodic physical verification using estimation techniques including observation, weighing and other industry methods. Prices of commodities we own may be volatile. We are exposed to risks associated with fluctuations in the market price for both ferrous and non-ferrous metals, which are at times volatile. We attempt to mitigate this risk by seeking to rapidly turn our inventories.

We make certain assumptions regarding future demand and net realizable value in order to assess that inventory is properly recorded at the lower of cost or market. We base our assumptions on historical experience, current market conditions and current replacement costs. If the anticipated future selling prices of scrap metal and finished steel products should decline, we would re-assess the recorded net realizable value of our inventory and make any adjustments we feel necessary in order to reduce the value of our inventory (and increase cost of goods sold) to the lower of cost or market.

As of January 4, 2010, we began using the specific identification method of valuing inventory. See “Inventories” under Note 1 – “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements for additional details on this change.

Property and Equipment

We carry the value of land on our books at cost. We report premises and equipment at cost less accumulated depreciation and amortization. We charge depreciation and amortization for financial reporting purposes to operating expense using the straight-line method over the estimated useful lives of the assets. We depreciate some assets over a one year period. Estimated useful lives are up to 40 years for buildings and leasehold improvements, 1 to 10 years for office and operating equipment, and 5 years for rental equipment. Our determination of estimated useful life includes past experience and normal deterioration. We include maintenance and repairs in selling, general and administrative expenses. We include gains and losses on disposition of premises and equipment in gain (loss) on sale of assets.

Valuation of long-lived assets and goodwill

We regularly review the carrying value of certain long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be realizable. If an evaluation is required, we compare the estimated future undiscounted cash flows associated with the asset to the asset’s carrying amount to determine if an impairment of such asset is necessary. The effect of any impairment would be to expense the difference between the fair value of such asset and its carrying value.

We review goodwill at least annually for impairment based on the fair value method prescribed in FASB’s authoritative guidance entitled “Goodwill.” At December 31, 2011, we determined, based on a third party valuation that no impairment existed. See also Note 13 – “Purchase of Inventory, Fixed Assets, and Intangible Assets of Venture Metals, LLC” in the Notes to Consolidated Financial Statements for information relating to this valuation.

Intangibles

Purchased intangible assets are initially recorded at cost and finite life intangible assets are amortized over their useful economic lives on a straight line basis. Intangible assets having indefinite lives and intangible assets that are not yet ready for use are not amortized and are reviewed annually for impairment in accordance with Note 1 – “Summary of Significant Accounting Policies – Fair Value of Financial Instruments.”

Intangible assets are considered to have indefinite lives when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate cash flows for the Company. The factors considered in making this determination include the existence of contractual rights for unlimited terms and the life cycles of the products and processes that depend on the asset. See also Note 1 – “Summary of Significant Accounting Policies – Intangibles,” and Note 13 – “Purchase of Inventory, Fixed Assets, and Intangible Assets of Venture Metals, LLC” in the Notes to Consolidated Financial Statements.

Derivative Instruments

Beginning in 2008, we have utilized derivative instruments in the form of interest rate swaps to assist in managing our interest rate risk. We do not enter into any interest rate swap derivative instruments for trading purposes. We account for the interest rate swaps in accordance with FASB’s authoritative guidance entitled “Accounting for Derivative Instruments and Hedging Activities,” as amended, which requires us to include the change in fair value of the interest rate swap in other comprehensive income.

Income Taxes

We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. We recognize the effect on deferred tax assets and liabilities of a change in tax rates in income in the period that includes the enactment date.

Results of Operations

The following table presents, for the years indicated, the percentage relationship that certain captioned items in our Consolidated Statements of Income bear to total revenues and other pertinent data:


Year ended December 31,	2011			2010			2009


Consolidated Statements of Income Data:
Total revenue		100.00	%		100.00	%		100.0	%
Total cost of goods sold		97.0	%		92.0	%		88.8	%
Selling, general and administrative expenses		4.6	%		4.0	%		5.8	%
Income (loss) before other income (expense)		(1.6	%)		4.0	%		5.4	%

The 5.0% increase in cost of goods sold as a percentage of revenue in 2011 as compared to 2010 is due to a 19.3% decrease in revenue due to lower demand for stainless steel, but only a 14.9% decrease in cost of goods sold. The lower percentage decrease in cost of goods sold is partially due to lower margins beginning in August 2011 and the inventory write down to lower of cost or market of $3.4 million as metal prices dropped in the last half of 2011. Increases in repairs and maintenance expenses, labor expenses, depreciation expense, and fuel, lubricant, and hauling expenses also increased the cost of goods sold percentage.

The 3.2% increase in cost of goods sold as a percentage of revenue in 2010 as compared to 2009 is due to increased processing fees, utility expense, and repairs and maintenance relating to the shredder. The shredder was placed in production in July, 2009, so only one half of 2009 included such expenses. A full year of these expenses is included in 2010.

Accumulated Other Comprehensive Income (Loss)

Comprehensive income is net income plus certain other items that are recorded directly to shareholders’ equity. Amounts included in other accumulated comprehensive loss for our derivative instruments are recorded net of the related

income tax effects. Refer to Note 1 – “Derivative and Hedging Activities” in the Notes to Consolidated Financial Statements for additional information about our derivative instruments. The following table gives further detail regarding the composition of other accumulated comprehensive income (loss) at December 31, 2011 and 2010.


Total accumulated other comprehensive loss as of 1/1/10	$	(338	)

Net unrealized loss on derivative instruments, net of tax, during 2010		(15	)

Total accumulated other comprehensive loss as of 12/31/10		(353	)

Net unrealized gain on derivative instruments, net of tax, during 2011		63

Total accumulated other comprehensive loss as of 12/31/11	$	(290	)

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Total revenue decreased $66.1 million or 19.3% to $276.9 million in 2011 compared to $343.0 million in 2010. Recycling revenue decreased $65.2 million or 19.5% to $269.5 million in 2011 compared to $334.7 million in 2010. This change was primarily due to a 107.0 million pound or 49.8% decrease in the volume of stainless steel shipments due to a decrease in worldwide stainless steel demand beginning in the second quarter. Substantially all of our stainless steel sales are to one customer. In response to the overall decrease in demand for stainless steel, this customer decreased our sales orders received in each of the last three quarters of the year. The volume of other nonferrous materials shipments also decreased by 2.1 million pounds, or 6.7%. In 2011, sales to existing recycling dealers decreased by approximately $75.2 million, or 23.1%. New dealer sales in 2011 totaled approximately $16.3 million, while lost dealer sales totaled only $6.9 million in 2010. In addition to the reduction in volume, total revenue was also affected by the decrease in overall average commodity prices for all materials shipped by $66.90 per gross ton, or 7.0%. Specifically as of December, nickel prices on the London Metal Exchange decreased 40% since the first quarter, falling to their lowest level in November 2011. Nickel is a key commodity used in stainless steel blends. These decreases were partially offset by a 14.6 thousand gross ton, or 7.5%, increase in the volume of ferrous shipments. Waste Services revenue decreased $0.9 million or 11.1% to $7.4 million in 2011 compared to $8.3 million in 2010. This decrease was primarily due to a decrease in management revenue of $0.9 million caused by the loss of several large customers in the first and second quarters. The decrease was partially offset by the gain of one large customer in the third quarter.

Total cost of goods sold decreased $47.1 million or 14.9% to $268.6 million in 2011 compared to $315.7 million in 2010. Recycling cost of goods sold decreased $46.4 million or 15.0% to $263.1 million in 2011 compared to $309.5 million in 2010. This decrease was primarily due to a decrease in the volume of purchases of stainless steel of 131.9 million pounds, or 59.0% along with the decreased volume of shipments noted above. Overall average commodity prices for materials purchased decreased $108.57 per gross ton, or 12.8%. Other decreases in cost of goods sold were as follows:


	•	a decrease of $0.5 million in processing costs;
	•	a decrease of $0.2 million in torching materials expense; and
	•	a decrease of $0.2 million in depreciation expense.

	These decreases were partially offset by an increase in the volume of ferrous purchases of 24.2 thousand gross tons, or 10.7%, and of nonferrous purchases of 6.8 million pounds, or 19.3%, as well as the following:

	•	a $3.4 million write-down of the value of stainless steel inventory to lower of cost or market due to the recent decreases in stainless steel demand and commodity prices, especially nickel;
	•	an increase of $0.6 million in repairs and maintenance expenses;
	•	an increase of $0.6 million in labor expenses; and
	•	an increase of $0.4 million in fuel, lubricant, and hauling costs.

Waste Services cost of goods sold decreased $0.7 million or 9.9% to $5.5 million in 2011 compared to $6.2 million in 2010 primarily due to the loss of customers mentioned above. We have reclassified certain expenses in our income statement to more accurately reflect segment performance and we have reclassified cost of goods sold and selling, general and administrative expenses for the year ended December 31, 2009 to be consistent with current presentation. These reclassifications had no effect on previously reported net income.

We make certain assumptions regarding future demand, current replacement costs and net realizable value in order to assess that we have properly recorded inventory at the lower of cost or market. We base our assumptions on historical experience, current market conditions and current replacement costs. Due to declines in the anticipated future selling prices of scrap metal and finished steel products, we recorded non-cash net realizable value inventory adjustments of $3.4 million in the

third quarter of 2011 to reduce the value of our inventory (and increase cost of goods sold) to the lower of cost or market. No such adjustment was made in 2010 or 2009.

Selling, general and administrative (SG&A) expenses decreased $1.0 million or 7.4% to $12.7 million in 2011 compared to $13.7 million in 2010. The decrease in SG&A expenses was primarily due to the following:


	•	a net decrease in stock and cash bonuses of $2.3 million; and
	•	a decrease in labor expenses of $0.5 million.

These decreases were partially offset by the following:


	•	an increase in fuel and lubricants and hauling expenses of $0.4 million;
	•	an increase in legal fees of $0.3 million;
	•	an increase in depreciation and amortization of $0.8 million;
	•	an increase in repair and maintenance expenses of $0.1 million;
	•	an increase in insurance expense of $0.1 million; and
	•	an increase in the management fee, directors’ fees, consulting fees, and compliance expenses of $0.1 million.

As a percentage of total revenue, selling, general and administrative expenses were 4.6% in 2011 compared to 4.0% in 2010.

Interest expense increased $0.5 million or 37.5% to $2.0 million in 2011 compared to $1.5 million in 2010 due to higher levels of debt in the first three quarters of 2011 compared to that same period in 2010. The increase in debt, mainly the revolving credit facility with the Bank, allows for funding temporary fluctuations in accounts receivable and inventory. We also purchased additional equipment using debt facilities.

Other loss was $0.6 million in 2011 compared to other income of $41.0 thousand in 2010, a decrease of $0.6 million, as outlined in the table below describing the significant components for each year. The $0.5 million increase in other expense resulted from the need to cancel purchase contracts due to the decrease in demand for stainless steel in the second quarter of 2011. These contracts required the Company to pay $0.5 million in termination fees. The Company chose to terminate these purchase contracts because the purchase contracts cancelled were valued at approximately $2.4 million, an amount well above the prevailing market price of the underlying commodities. Because the Company can purchase these commodities in the market at lower cost when needed to fill new shipment orders, management determined that the Company could benefit from market volatility by cancelling these contracts, even after paying the termination fees.

Significant components of other income (expense), in thousands, were as follows:


	Fiscal Year Ended December 31

Description Other Income (Expense)	2011			2010


Lennox Industries legal settlement	$	(84.5	)	$	—
Fee to cancel purchase contracts		(500.0	)		—
Other		18.5			41.0

Total other income, net	$	(566.0	)	$	41.0

The income tax provision decreased $7.4 million to a credit of $3.0 million in 2011 compared to a provision of $4.4 million in 2010 due to the loss reported in 2011, which included the inventory write-down of $3.4 million. The effective tax rates in 2011 and 2010 were 43.9% and 35.2% based on federal and state statutory rates. In 2011, the Internal Revenue Service conducted an examination of our 2009 income tax return and, per the final report, proposed changes amounting to approximately $735.0 thousand of additional taxes due for which we expect to receive an invoice early in 2012. This adjustment arose from our use of bonus depreciation rules for certain additions to shredding equipment which were determined to be disqualified for bonus depreciation. This resulting adjustment to 2009 depreciation deductions allowed us to file an amended U.S. tax return for 2010, pursuant to which we claimed additional depreciation deductions and resulting in a claim for a refund of income taxes paid amounting to approximately $113.0 thousand. The additional tax and refund due have both been accrued as of December 31, 2011. In 2010, we received a state tax credit for the purchase of the shredder equipment as well as a Domestic Production Activity Deduction. Refer to Note 4 – “Income Taxes” in the Notes to Consolidated Financial Statements.

Financial Condition at December 31, 2011 compared to December 31, 2010

Cash and cash equivalents decreased $0.2 million to $2.3 million as of December 31, 2011 compared to $2.5 million at December 31, 2010.

Net cash from operating activities was $19.0 million for the year ending December 31, 2011, compared to net cash used in operating activities of $5.8 million for the same period in 2010. The increase in net cash from operating activities is primarily due to decreases in inventories of $15.8 million and in receivables of $10.2 million, partially offset by an increase in income tax receivable of $4.0 million and decreases in accounts payable of $0.7 million, decreases in income tax payable of $2.9 million, and decreases in accrued bonuses of $1.2 million. The decreases in inventories and receivables relate to the decrease in demand for stainless steel and other nickel-based scrap metal beginning in the second quarter, thus lowering both sales and purchasing activity. We also paid $0.5 million in termination fees to cancel several purchase contracts in the second quarter of 2011 and made timely payments to our vendors, which decreased our outstanding accounts payable balance in 2011.

We used net cash in investing activities of $2.3 million for the year ending December 31, 2011 compared to $3.7 million for the same period in 2010. The difference of $1.4 million was primarily due to purchasing $1.4 million less in property and equipment in 2011 as compared to 2010. In 2011, we used $0.7 million for road and building improvements. We purchased recycling and rental fleet equipment, shredder system equipment, and office equipment of $1.4 million. The rental fleet equipment consists of solid waste handling and recycling equipment such as compactors, waste edge monitors, balers, and carts. It is our intention to continue to pursue this market. We also used $0.3 million to purchase and upgrade vehicles. We received $0.2 million from sales of our rental fleet compactors, balers, and containers. We paid deposits of $36.6 thousand on machinery and equipment.

We used net cash in financing activities of $16.9 million in the year ending December 31, 2011 compared to net cash from financing activities of $11.2 million for the same period in 2010, a difference of $28.1 million. The primary source of the net cash decrease was a decrease in proceeds from long-term debt totaling $0.3 million in 2011 compared to $45.0 million in 2010. This decrease was partially offset by a decrease in payments on long term debt totaling $17.3 million in 2011 compared to $33.8 million in 2010. There were no cash dividends paid or common stock repurchases in 2011 or 2010.

Trade accounts receivable after allowances for doubtful accounts decreased $10.2 million or 37.4% to $17.2 million as of December 31, 2010 compared to $27.4 million as of December 31, 2010. This change was primarily due to the decreased volume of stainless steel and ferrous shipments in the fourth quarter of 2011.

Recycling accounts receivable decreased $8.6 million or 34.5% to $16.3 million as of December 31, 2011 compared to $24.9 million as of December 31, 2010. This change was primarily due to stainless steel sales and the timing of the receipt of payment related to these sales as well as a decrease in the volume of stainless steel, ferrous, and nonferrous shipments in the fourth quarter. On average, the volume of stainless steel shipments decreased 43.8 million pounds or 69.4%, the volume of ferrous shipments decreased 10.6 gross tons or 19.7%, and the volume of nonferrous shipments decreased 218.7 thousand pounds or 2.6% in the fourth quarter of 2011 compared to the same period in 2010. On average, overall prices decreased $268.39 per gross ton or 26.1% in the fourth quarter of 2011 compared to the same period in 2010.

Waste Services’ accounts receivable decreased $0.2 million or 17.5% to $0.9 million as of December 31, 2011 compared to $1.1 million as of December 31, 2010. In general, the accounts receivable balance fluctuates due to the timing of services and receipt of customer payments.

Inventories for sale consist principally of stainless steel alloys, ferrous and nonferrous scrap materials and waste equipment machinery held for resale. We value inventory at the lower of cost or market. We use the replacement parts included in inventory within a one-year period as these parts wear out quickly due to the high-volume and intensity of the shredder function. We depreciate these replacement parts over a one-year life. Inventory decreased $15.8 million or 46.0% to $18.5 million as of December 31, 2011 compared to $34.3 million as of December 31, 2010. With lower demand for stainless steel causing fewer sales orders in the second quarter, we decreased purchasing activity and cancelled several purchase contracts. Overall, we decreased the volume of stainless steel purchases by 131.9 million pounds or 59.0% for the year. Lower demand also put downward pressure on metal prices. We made an adjustment of approximately $3.4 million to lower our stainless steel inventory value to the market value in the third quarter. These decreases were partially offset by an increase in the volume of ferrous purchases of 24.2 gross tons or 10.7%, and an increase in the volume of nonferrous purchases of 6.8 million pounds or 19.3% in 2011 as compared to 2010. Inventories, in thousands, as of December 31, 2011 and December 31, 2010 consisted of the following:


	2011		2010

Stainless steel, ferrous, and non-ferrous materials	$	16,819	$	32,864
Waste equipment machinery		39		75
Other		63		59


Total inventories for sale		16,921		32,998

Replacement parts		1,623		1,313


Total inventories	$	18,544	$	34,311

As of December 31, 2011, stainless steel inventory consisted of 14.3 million pounds at a unit cost of $0.691 per pound, which includes processing costs. As of December 31, 2010, stainless steel inventory consisted of 31.8 million pounds at a unit cost of $0.777 per pound. As of December 31, 2011, ferrous inventory consisted of 9.9 thousand gross tons at a unit cost, including processing costs, of $449.74 per gross ton. As of December 31, 2010, ferrous inventory consisted of 15.9 thousand gross tons at a unit cost, including processing costs, of $396.84 per gross ton. As of December 31, 2011, nonferrous inventory consisted of 2.3 million pounds with a unit cost, including processing costs, of $1.087 per pound. As of December 31, 2010, nonferrous inventory consisted of 1.8 million pounds at a unit cost, including processing costs, of $1.048 per pound.


Year	Inventory Type	Pounds		Unit Cost		Amount


2011	Stainless Steel		14,333,732	$	0.691	$	9,911,380
2010	Stainless Steel		31,818,693	$	0.777	$	24,714,342

Year	Inventory Type		Gross Tons		Unit Cost		Amount


2011	Ferrous		9,885	$	449.741	$	4,445,821
2010	Ferrous		15,866	$	396.840	$	6,296,255

Year	Inventory Type		Pounds		Unit Cost		Amount


2011	Non-ferrous		2,265,388	$	1.087	$	2,461,694
2010	Non-ferrous		1,769,283	$	1.048	$	1,853,424


Inventory aging for the period ended December 31, 2011 (Days Outstanding):

	(in thousands)
Description	1 - 30		31 - 60		61 - 90		Over 90		Total

Stainless steel, ferrous and non-ferrous materials	$	11,160	$	1,475	$	424	$	3,760	$	16,819
Replacement parts		1,623		—		—		—		1,623
Waste equipment machinery		—		—		—		39		39
Other		63		—		—		—		63

Total	$	12,846	$	1,475	$	424	$	3,799	$	18,544


Inventory aging for the period ended December 31, 2010 (Days Outstanding):

	(in thousands)
Description	1 - 30		31 - 60		61 - 90		Over 90		Total

Stainless steel, ferrous and non-ferrous materials	$	25,062	$	5,450	$	1,184	$	1,168	$	32,864
Replacement parts		1,313		—		—		—		1,313
Waste equipment machinery		—		—		—		75		75
Other		59		—		—		—		59

Total	$	26,434	$	5,450	$	1,184	$	1,243	$	34,311

Inventory in the “Over 90 days” category as of December 31, 2011 includes several materials that are bought in bulk for pricing and used sparingly in blends. We purchased these materials prior to the decrease in demand for stainless steel and other nickel-based scrap. We adjusted the value of several of these materials to lower of cost or market in the third quarter due to the drop in market prices at that time. We did not use much of these materials in the latter part of the year due to the decreased demand for stainless steel and other nickel-based scrap metals beginning in the second quarter. We cannot assure that global demand will improve in the near term.

Accounts payable trade decreased $0.7 million or 6.4% to $10.7 million as of December 31, 2011 compared to $11.4 million as of December 31, 2010. Recycling accounts payable increased $0.2 million or 2.2% to $9.5 million as of December 31, 2011 compared to $9.3 million as of December 31, 2010. This increase was primarily due to increased purchasing of stainless steel materials near the end of the year and by an increase in the volume of purchases for nonferrous materials of 1.7 million pounds, or 17.2% in the fourth quarter of 2011 as compared to the same period in 2010. Overall, there was a decrease in the volume of purchases for stainless steel materials of 54.2 million pounds, or 77.5% and for ferrous materials of 16.9 gross tons, or 27.1% in the fourth quarter of 2011 as compared to the same period in 2010. The overall average commodity purchase prices for all materials decreased by $199.4 per gross ton, or 22.0%. Our accounts payable payment policy in the recycling segment is consistent between years.

Waste Services accounts payable decreased $0.3 million or 19.5% to $1.0 million as of December 31, 2011 compared to $1.3 million as of December 31, 2010. This change was due to market conditions and the timing of payments.

Working capital decreased $17.9 million to $29.4 million as of December 31, 2011 compared to $47.3 million as of December 31, 2010. Decreases in net accounts receivable of $10.2 million, in inventories of $15.8 million, and in deferred income taxes of $0.5 million were positive contributors to working capital in 2011, partially offset by an increase in income tax receivable of $4.0 million and decreases in accounts payable of $0.7 million, income tax payable of $2.9 million, and accrued bonus of $1.2 million. During 2011, we used these positive working capital contributors to purchase or make deposits on property and equipment of $2.5 million and to decrease our revolving debt.

Contractual Obligations

The following table provides information with respect to our known contractual obligations for the year ended December 31, 2011:


	Payments due by period (in thousands)

	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years

Obligation Description (2)

Long-term debt obligations	$	28,509	$	1,821	$	26,653	$	35	$	—

Operating lease obligations (1)		1,125		721		252		152		—


Total	$	29,634	$	2,542	$	26,905	$	187	$	—


	(1)	We lease the Louisville, Kentucky facility from K&R, LLC, the sole member of which is Harry Kletter, our chief executive officer, under an operating lease expiring December 2012 with automatic annual renewals thereafter unless one party provides written notice to the other party of its intent not to renew at least six months in advance of the next renewal date. We have monthly rental payments of $48.5 thousand through December 2012. In the event of a change of control, the monthly payments become $62.5 thousand. See Item 2. Properties -- Related Parties Agreements.

		We also lease equipment from K&R, LLC for which monthly payments of $5.5 thousand are due through October 2015 and monthly payments of $5.0 thousand are due through April 2016.

		We lease a management services operations facility and various pieces of equipment in Dallas, Texas for which monthly payments of $1.0 thousand are due through September 2012.

		We subleased the Lexington property to an unaffiliated third party for a term commencing March 1, 2007 and ending January 31, 2012 for $4.5 thousand per month. We leased this property from an unrelated party for $4.5 thousand per month. The lease terminated on February 10, 2012.

	(2)	All interest commitments under interest-bearing debt are included in this table, excluding the interest rate swaps, for which changes in value are accounted for in other comprehensive income.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

Total revenue increased $162.0 million or 89.5% to $343.0 in 2010 compared to $181.0 million in 2009. Recycling revenue increased $162.8 or 94.8% to $334.7 in 2010 compared to $171.8 in 2009. This change was primarily due to a 54.3 million pound, or 33.9%, increase in the volume of stainless steel shipments, a 95.5 thousand gross ton, or 96.8%, increase in the volume of ferrous shipments, and a 1.6 million pound, or 5.2%, increase in the volume of nonferrous shipments. In 2010, sales to existing Recycling dealers increased by approximately $153.0 million, or 98.3%. New dealer sales in 2010 totaled approximately $24.4 million, while lost dealer sales totaled only $4.4 million in 2009. Overall average commodity prices for materials shipped increased $112.26 per gross ton, or 13.3%. Waste Services revenue decreased $872.3 thousand or 9.5% to $8.3 million in 2010 compared to $9.2 million in 2009. This decrease was primarily due to a decrease in management revenue of $1.5 million caused by the permanent loss of two major customers due to bankruptcy and a net decrease in sales to other customers, partially offset by several new customers in 2010 and an increase in cardboard revenue of $410.2 thousand due to an increase in average cardboard prices throughout 2010.

Total cost of goods sold increased $155.0 million or 96.4% to $315.7 million in 2010 compared to $160.8 million in 2009. Recycling cost of goods sold increased $155.0 million or 100.3% to $309.5 million in 2010 compared to $154.5 million in 2009. This increase was primarily due to an increase in the volume of purchases of stainless steel of 37.1 million pounds, or 20.1%, of ferrous purchases of 121.3 thousand gross tons, or 115.3%, and of nonferrous purchases of 6.4 million pounds, or 22.5% along with the increased volume of shipments noted above. Overall average commodity prices for materials purchased increased $57.43 per gross ton, or 7.3%. Other increases in cost of goods sold were as follows:


	•	An increase of $6.2 million in processing costs;


	•	An increase of $1.2 million in labor expenses;
	•	An increase of $830.7 thousand in repairs and maintenance expenses;
	•	An increase of $741.6 thousand in depreciation expense;
	•	An increase of $670.0 thousand in utilities expenses; and
	•	An increase of $209.3 thousand in fuel and lubricant costs.

These increases were partially offset by a decrease in bonus expense of $1.3 million.

Waste Services cost of goods sold decreased $0.1 million or 0.6% to $6.2 million in 2010 compared to $6.3 in 2009.

Selling, general and administrative (SG&A) expenses increased $3.2 million or 31.0% to $13.7 million in 2010 compared to $10.5 million in 2009. The increase in SG&A expenses was primarily due to the following:


	•	a net increase in stock bonuses, stock options, and cash bonuses of $1.8 million;
	•	an increase in the management fee, consulting fees, and compliance expenses of $351.1 thousand;
	•	an increase in amortization of $375.0 thousand;
	•	an increase in sales and service managers and supervisors labor expenses of $252.4 thousand;
	•	an increase in insurance expense of $119.2 thousand;
	•	an increase in fuel and lubricants and hauling expenses of $104.4 thousand;
	•	an increase in operating supplies of $101.1 thousand; and
	•	an increase in benefits of $82.7 thousand.

As a percentage of total revenue, selling, general and administrative expenses were 4.0% in 2010 compared to 5.8% in 2009.

Interest expense increased $0.4 million or 34.4% to $1.5 million in 2010 compared to $1.1 million in 2009 due to an increase in long term debt in 2010 compared to 2009. The increase in debt, mainly the revolving credit facility with the Bank, allows for funding temporary fluctuations in accounts receivable and inventory. We also purchased additional equipment using debt facilities.

Other income was $40.1 thousand in 2010 compared to other loss of ($29.3) thousand in 2009, an increase of $69.4 thousand, as outlined in the table below describing the significant components for each year. In the first quarter of 2009, we paid an additional $65.6 thousand for legal and court costs associated with the settlement of a prior year court case.

Significant components of other income (expense) in thousands were as follows:


	Fiscal Year Ended December 31

Description Other Income (Expense)	2010		2009


Additional settlement to AAR	$	—	$	(65.6	)
Other		40.1		36.3

Total other income, net	$	40.1	$	(29.3	)

The income tax provision is 35.5% for the year ended December 31, 2010 compared to 39.8% for the year ended December 31, 2009 based on federal and state statutory rates. We received a tax credit for the purchase of the shredder equipment as well as a Domestic Production Activity Deduction in 2010. Refer to Note 4 – “Income Taxes” in the Notes to Consolidated Financial Statements.

Financial Condition at December 31, 2010 compared to December 31, 2009

Cash and cash equivalents increased $1.8 million to $2.5 million as of December 31, 2010 compared to $0.7 million at December 31, 2009.

We used net cash from operating activities of $5.8 million for the year ending December 31, 2010, compared to using net cash from operating activities of $5.6 million for the same period in 2009.

We used net cash from investing activities of $3.7 million for the year ending December 31, 2010 compared to $19.6 million for the same period in 2009. The difference of $15.9 million was primarily due to $11.9 million related to the acquisition of Venture Metals, LLC land, fixed assets, goodwill, and inventory in 2009, and $6.5 million spent on the shredder

system in 2009, partially offset by an increase of $2.7million in purchases of and deposits on other property, plant, and equipment in 2010 compared to 2009.

Net cash from financing activities decreased $13.5 million to $11.2 million for the year ending December 31, 2010 compared to $24.7 million for the same period in 2009. The primary source of the net cash decrease was an increase in payments on long-term debt totaling $33.8 million in 2010 compared to $2.4 million in 2009. This decrease was offset by an increase in borrowings totaling $45.0 million in 2010 compared to $27.2 million in 2009. There were no cash dividends paid or common stock repurchases in 2010 or 2009.

Trade accounts receivable after allowances for doubtful accounts increased $18.9 million or 222.5% to $27.4 million as of December 31, 2010 compared to $8.5 million as of December 31, 2009. This change was primarily due to the increased volume of stainless steel and ferrous shipments in the fourth quarter.

Recycling accounts receivable increased $17.4 million or 231.5% to $24.9 million as of December 31, 2010 compared to $7.5 million as of December 31, 2009. This change was primarily due to stainless steel sales and the timing of the receipt of payment related to these sales as well as an increase in the volume of stainless steel and ferrous shipments in the fourth quarter. On average, the volume of stainless steel shipments in pounds increased 360.1% and ferrous shipments in gross tons increased 51.3% in the fourth quarter of 2010 compared to the same period in 2009. On average, stainless steel prices increased 42.0% and ferrous sales prices increased 13.5% in the fourth quarter of 2010 compared to the same period in 2009. On average, the volume of nonferrous shipments in pounds decreased 16.8% in the fourth quarter of 2010 compared to the fourth quarter of 2009. On average, nonferrous sales prices increased 37.3% in the fourth quarter of 2010 compared to the same period in 2009.

Waste Services’ accounts receivable increased $159.6 thousand or 16.3% to $1.1 million as of December 31, 2010 compared to $980.9 thousand as of December 31, 2009. This increase relates to larger write offs of bankruptcy related customer accounts in 2009, a lower portion of the allowance for doubtful accounts allocated to Waste Services in 2010 after collecting or writing off accounts, as well as the timing of the receipt of payments.


	December 31, 2010		December 31, 2009


Stainless steel alloys	$	24,714	$	21,549
Ferrous materials		6,296		1,588
Non-Ferrous materials		1,854		2,219
Waste equipment machinery		75		102
Other		59		89


Total inventories for sale		32,998		25,547

Replacement parts		1,313		880


Total inventories	$	34,311	$	26,427

As of December 31, 2010, stainless steel inventory consisted of 31.8 million pounds at a unit cost of $0.777 per pound, which includes processing costs. As of December 31, 2009, stainless steel inventory consisted of 26.1 million pounds at a unit cost of $0.826 per pound. As of December 31, 2010, ferrous inventory consisted of 15.9 thousand gross tons at a unit cost, including processing costs, of $396.8 per gross ton. As of December 31, 2009, ferrous inventory consisted of 5.8 thousand gross tons at a unit cost, including processing costs, of $272.061 per gross ton. As of December 31, 2010, nonferrous inventory consisted of 1.8 million pounds with a unit cost, including processing costs, of $1.048 per pound. As of December 31, 2009, nonferrous inventory consisted of 1.8 million pounds at a unit cost, including processing costs, of $1.209 per pound.

products, we recorded non-cash net realizable value (NRV) inventory adjustments of $1.2 million in the fourth quarter 2008 to reduce the value of our inventory (and increase cost of goods sold) to the lower of cost or market. Such an adjustment was not necessary in 2010 or 2009.


Year	Inventory Type	Pounds		Unit Cost		Amount


2010	Stainless Steel		31,818,693	$	0.777	$	24,714,342
2009	Stainless Steel		26,086,771	$	0.826	$	21,549,014

Year	Inventory Type	Gross Tons		Unit Cost		Amount


2010	Ferrous		15,866	$	396.840	$	6,296,255
2009	Ferrous		5,835	$	272.061	$	1,587,475

Year	Inventory Type	Pounds		Unit Cost		Amount


2010	Nonferrous		1,769,283	$	1.048	$	1,853,424
2009	Nonferrous		1,835,719	$	1.209	$	2,219,137

Inventory aging for the period ended December 31, 2010 (Days Outstanding):


	(in thousands)
Description	1 - 30		31 - 60		61 - 90		Over 90		Total

Stainless steel, ferrous and non-ferrous materials	$	25,062	$	5,450	$	1,184	$	1,168	$	32,864
Replacement parts		1,313		—		—		—		1,313
Waste equipment machinery		—		—		—		75		75
Other		59		—		—		—		59

Total	$	26,434	$	5,450	$	1,184	$	1,243	$	34,311

Inventory aging for the period ended December 31, 2009 (Days Outstanding):


	(in thousands)
Description	1 - 30		31 - 60		61 - 90		Over 90		Total

Stainless steel, ferrous and non-ferrous materials	$	15,053	$	2,855	$	5,238	$	2,210	$	25,356
Replacement parts		880		—		—		—		880
Waste equipment machinery		10		—		—		92		102
Other		89		—		—		—		89

Total	$	16,032	$	2,855	$	5,238	$	2,302	$	26,427

Accounts payable trade increased $6.7 million or 143.5% to $11.4 million as of December 31, 2010 compared to $4.7 million as of December 31, 2009. Recycling accounts payable increased $6.2 million or 196.1% to $9.3 million as of December 31, 2010 compared to $3.1 million as of December 31, 2009. This increase was primarily due to the increases in the volumes of purchases for stainless steel of 152.41%, for ferrous materials of 90.9%, and for nonferrous materials of 21.6% in the fourth quarter of 2010 as compared to the same period in 2009, as well as the overall average commodity purchase prices for these materials increased by 78.0%. Our accounts payable payment policy in the recycling segment is consistent between years.

Waste Services accounts payable increased $6.7 thousand or 0.5% to $1.3 million as of December 31, 2010 compared to $1.3 million as of December 31, 2009. This change was due to market conditions and the timing of payments.

Working capital increased $36.0 million to $47.3 million as of December 31, 2010 compared to $11.3 million as of December 31, 2009. Increases in net accounts receivable of $18.9 million and in inventories of $7.9 million, and decreases in the current maturities of long-term debt of $10.7 million and the note payable to BB&T of $5.0 million were positive contributors to working capital in 2010, offset by increases in accounts payable of $6.7 million and income tax payable of $2.4 million.

During 2010, we used these positive working capital contributors to purchase or make deposits on property and equipment of $4.1 million.

Inflation and Prevailing Economic Conditions

To date, inflation has not and is not expected to have a significant impact on our operation in the near term. We have no long-term fixed-price contracts and we believe we will be able to pass through most cost increases resulting from inflation to our customers. We are susceptible to the cyclical nature of the commodity business. In response to these economic conditions, we have expanded the recycling area of the business and continue to focus on the management consulting area of the business and are working to liquidate inventories while we make efforts to enhance gross margins.

Impact of Recently Issued Accounting Standards

In September 2011, the FASB issued ASU No. 2011-08, an amendment to Topic 350, Intangibles—Goodwill and Other, which simplifies how entities test goodwill for impairment. Previous guidance under Topic 350 required an entity to test goodwill for impairment using a two-step process on at least an annual basis. First, the fair value of a reporting unit was calculated and compared to its carrying amount, including goodwill. Second, if the fair value of a reporting unit was less than its carrying amount, the amount of impairment loss, if any, was required to be measured. Under the amendments in this update, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads the entity to determine that it is more likely than not that its fair value is less than its carrying amount. If after assessing the totality of events or circumstances, an entity determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is unnecessary. If the entity concludes otherwise, then it is required to test goodwill for impairment under the two-step process as described under paragraphs 350-20-35-4 and 350-20-35-9 under Topic 350. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, the quarter ending March 31, 2012 for us, and early adoption is permitted. We do not expect the adoption of ASU 2011-08 will have a material impact on our Condensed Consolidated Financial Statements.

In June 2011, the FASB issued ASU 2011-05, which is an update to Topic 220, “Comprehensive Income”. This update eliminates the option of presenting the components of other comprehensive income as part of the statement of changes in stockholders’ equity, requires consecutive presentation of the statement of net income and other comprehensive income and requires reclassification adjustments from other comprehensive income to net income to be shown on the financial statements. ASU 2011-05 is effective for all interim and annual reporting periods beginning after December 15, 2011, the quarter ending March 31, 2012 for us. However, ASU 2011-12 has deferred the specific requirement within ASU 2011-05 to present on the face of the financial statements items that are reclassified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income. Entities should continue to report reclassifications out of accumulated comprehensive income consistent with the presentation requirements in effect before ASU 2011-05. We do not expect a material impact on our financials due to the implementation of this guidance. As ASU No. 2011-05 relates only to the presentation of Comprehensive Income, we do not expect the adoption of this update will have a material effect on our Condensed Consolidated Financial Statements.

In May 2011, the FASB issued ASU No. 2011-04, which is an update to Topic 820, “Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). The amendments in this ASU generally represent clarification of Topic 820, but also include instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRS. The amendments are effective for interim and annual periods beginning after December 15, 2011, the quarter ending March 31, 2012 for us, and are to be applied prospectively. Early application is not permitted. We do not expect the adoption of ASU 2011-04 will have a material impact on our Condensed Consolidated Financial Statements.


Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.

Fluctuating commodity prices affect market risk in our recycling segment. We mitigate this risk by selling our product on a monthly contract basis. Each month we negotiate selling prices for all commodities. Based on these monthly agreements, we determine purchase prices based on a margin needed to cover processing and administrative expenses.

We are exposed to commodity price risk, mainly associated with variations in the market price for stainless steel, ferrous and nonferrous metal, and other commodities. The timing and magnitude of industry cycles are difficult to predict and general economic conditions impact the cycles. We respond to changes in recycled metal selling prices by adjusting purchase prices on a timely basis and by turning rather than holding inventory in expectation of higher prices. However, an adverse impact on our

financial results may occur if selling prices fall more quickly than we can adjust purchase prices or if levels of inventory have an anticipated net realizable value that is below average cost.

Our floating rate borrowings expose us to interest rate risk.

In a prior year, we entered into three interest rate swap agreements swapping variable rates for fixed rates. The first swap agreement covers approximately $4.7 million in debt and commenced April 7, 2009 and matures on April 7, 2014. The second swap agreement covers approximately $2.1 million in debt and commenced October 15, 2008 and matures on May 7, 2013. The third swap agreement covers approximately $457.5 thousand in debt and commenced October 22, 2008 and matures on October 22, 2013. The three swap agreements fix our interest rate at approximately 5.8%. At December 31, 2011, we recorded the estimated fair value of the liability related to the three swaps at approximately $484.2 thousand. We entered into the swap agreements for the purpose of hedging the interest rate market risk for the respective notional amounts. These swap agreements were not affected by the debt restructuring with Fifth Third Bank. We maintain a cash account on deposit with BB&T which serves as collateral for the swap agreements. See Note 3 – “Notes Payable to Bank” in the Notes to Consolidated Financial Statements for an outline of the notional amounts relating to these agreements.

We are exposed to market risk from changes in interest rates in the normal course of business. Our interest income and expense are most sensitive to changes in the general level of U.S. interest rates and the LIBOR rate. In order to manage this exposure, we use a combination of debt instruments, including the use of derivatives in the form of interest rate swap agreements. We do not enter into any derivatives for trading purposes. The use of the interest rate swap agreement is intended to convert the variable rate to a fixed rate.


Item 8.	Consolidated Financial Statements and Supplementary Data.

Our consolidated financial statements required to be included in this Item 8 are set forth in Item 15 of this report.


Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.


Item 9A.	Controls and Procedures.


(a)	Disclosure controls and procedures.

	ISA’s management, including ISA’s principal executive officer and principal financial officer, have evaluated the effectiveness of our “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934. Based upon their evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2011, ISA’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that ISA files under the Exchange Act with the Securities and Exchange Commission (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to ISA’s management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding the required disclosure.

(b)	Internal controls over financial reporting.

	Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our internal control over financial reporting includes the process designed by, or under the supervision of, our CEO and CFO, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

	--	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;

	--	provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and


	--	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

	Because of its inherent limitations, internal control over financial reporting cannot prevent or detect every potential misstatement. Therefore, even those systems determined to be effective can provide only reasonable assurances with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may decline.

	Our management conducted an evaluation of the effectiveness of our internal control over financial reporting, based on the framework and criteria established in Internal Control -- Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management assessed the effectiveness of our internal control over financial reporting for the year ended December 31, 2011, and concluded that such internal control over financial reporting was effective as of December 31, 2011.

	This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that require only management’s report in this Annual Report on Form 10-K.

(c)	Changes to internal control over financial reporting

	There were no changes in ISA’s internal control over financial reporting during the year ended December 31, 2011 that have materially affected, or are reasonably likely to affect ISA’s internal control over financial reporting.


Item 9B.	Other Information.

None.

PART III


Item 10.	ISA Directors Executive Officers and Corporate Governance. *

Item 11.	Executive Compensation *

Item 12.	Security Ownership of Certain Beneficial Owners, Management and Related Stockholder Matters. *

Item 13.	Certain Relationships and Related Transactions, and Director Independence. *

Item 14.	Principal Accountant Fees and Services. *

* The information required by Items 10, 11, 12, 13 and 14 is or will be set forth in the definitive proxy statement relating to the 2012 Annual Meeting of Shareholders of ISA which is to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after ISA’s year end for the year covered by this report under the Securities Exchange Act of 1934, as amended. Such definitive proxy statement relates to an annual meeting of shareholders and the portions therefrom required to be set forth in this Form 10-K by Items 10, 11, 12, 13 and 14 are incorporated herein by reference pursuant to General Instruction G(3) to Form 10-K.

PART IV


Item 15.	Exhibits and Consolidated Financial Statement Schedules.

(a)(1) The following consolidated financial statements of Industrial Services of America, Inc. are filed as a part of this report:


		Page


Report of Independent Registered Public Accounting Firm		F-1

Consolidated Balance Sheets as of December 31, 2011 and 2010		F-2

Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009		F-4

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2011, 2010 and 2009		F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009		F-6

Notes to Consolidated Financial Statements		F-7

(a)(2) Consolidated Financial Statement Schedules.


Schedule II--Valuation and Qualifying Accounts for the years ended December 31, 2011, 2010 and 2009		F-39

(a)(3) List of Exhibits

Exhibits filed with, or incorporated by reference herein, this report are identified in the Index to Exhibits appearing in this report. The Management Agreement and the Consulting Agreement required to be filed as exhibits to this Form 10-K pursuant to Item 15(b) are noted by an asterisk (*) in the Index to Exhibits.

(b) Exhibits.

The exhibits listed on the Index to Exhibits are filed as a part of this report.

Schedule II—Valuation and Qualifying Accounts for the years ended December 31, 2011, 2010 and 2009 are incorporated by reference at page F-39 of the ISA Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	INDUSTRIAL SERVICES OF AMERICA, INC.

Dated: March 7, 2012	By :	/s/ Harry Kletter

		Harry Kletter, Chairman of the Board
		and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:


Signature	Title	Date


/s/ Harry Kletter	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	March 7, 2012

Harry Kletter

/s/ Brian Donaghy	President, Chief Operating Officer and Director	March 7, 2012

Brian Donaghy

/s/ Robert Coleman	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	March 7, 2012

Robert Coleman

/s/ Orson Oliver	Director	March 7, 2012

Orson Oliver

/s/ Roman Epelbaum	Director	March 7, 2012

Roman Epelbaum

/s/ Albert Cozzi	Director	March 7, 2012

Albert Cozzi

/s/ Francesca Scarito	Director	March 7, 2012

Francesca Scarito

/s/ David Russell	Director	March 7, 2012

David Russell

INDEX TO EXHIBITS


Exhibit Number		Description of Exhibits


3.1	**	Certificate of Incorporation of ISA is incorporated by reference to Exhibit 3.1 of ISA’s report on Form 10-KSB for the year ended December 31, 1995.

3.2		Articles of Amendment to the Articles of Incorporation of ISA, dated February 29, 2012.

3.3		Amended and Restated Bylaws of ISA, dated January 19, 2012.

10.1	**	Lease Agreement, dated January 1, 1998, by and between ISA and K&R, is incorporated by reference herein, to Exhibit 10.10 on Form 8-K of ISA, filed March 3, 1998 (File No. 0-20979).*

10.2	**	Consulting Agreement, dated as of January 2, 1998, by and between ISA and K&R, is incorporated by reference herein, to Exhibit 10.11 on Form 8-K of ISA, filed March 3, 1998 (File No. 0-20979).*

10.3	**	Promissory Note for K&R, LLC in favor of ISA in the principal amount of $302,160, dated March 25, 2006, and effective December 31, 2005, is incorporated by reference herein to Exhibit 10.32 of ISA’s report on Form 10-K for the year ended December 31, 2005, as filed on March 31, 2006.

10.4	**	Asset Purchase Agreement dated as of August 2, 2007, between ISA and Industrial Logistic Services, LLC, including exhibits thereto, is incorporated by reference herein to Exhibit 10.1 of ISA’s report on Form 8-K for the event reported on August 2, 2007, as filed on August 8, 2007.

10.5	**	Executive Employment Agreement dated as of August 2, 2007, between ISA and Brian G. Donaghy is incorporated by reference herein to Exhibit 10.2 of ISA’s report on Form 8-K for the event reported on August 2, 2007, as filed on August 8, 2007.

10.6	**	Employment Agreement dated effective as of April 4, 2007, between ISA and James K. Wiseman, III is incorporated by reference herein to Exhibit 10.3 of ISA’s report on Form 8-K for the event reported on August 2, 2007, as filed on August 8, 2007.

10.7	**	Swap Confirmation, dated October 20, 2008, between ISA and Branch Banking and Trust Company in the notional amount of $2,897,114.77 is incorporated by reference herein to Exhibit 10.4 of ISA’s Report on Form 10-Q for the quarter ended September 30, 2008, as filed on November 5, 2008.

10.8	**	Swap Confirmation, dated October 20, 2008, between ISA and Branch Banking and Trust Company in the notional amount of $6,000,000 is incorporated by reference herein to Exhibit 10.5 of ISA’s Report on Form 10-Q for the quarter ended September 30, 2008, as filed on November 5, 2008.

10.9	**	Agreement to Purchase Real Estate, dated as of April 2, 2009, between ISA and LUCA Investments, LLC, is incorporated by reference herein to Exhibit 10.1 of ISA’s report on Form 8-K for the event reported on April 2, 2009, as filed on April 7, 2009.

10.10	**	Agreement and Plan of Share Exchange, dated as of July 16, 2009, between ISA and Harry Kletter Family Limited Partnership, is incorporated by reference herein to Exhibit 10.1 of ISA’s report on Form 8-K for the event reported on July 16, 2009, as filed on July 17, 2009.

10.11	**	Agreement and Plan of Share Exchange, dated as of July 16, 2009, between ISA and Harry Kletter Family Limited Partnership, is incorporated by reference herein to Exhibit 10.2 of ISA’s report on Form 8-K for the event reported on July 16, 2009, as filed on July 17, 2009.


Exhibit Number		Description of Exhibits


10.12	**	Loan Agreement, dated April 13, 2010, in the amount of $20,000,000 from ISA in favor of Branch Banking and Trust Company and BB&T Bankcard Corporation of North Carolina is incorporated by reference herein to Exhibit 10.1 of ISA’s Report on Form 10-Q for the quarter ended March 31, 2010, as filed on May 10, 2010.

10.13	**	Schedule “DD” to BB&T Loan Agreement is incorporated by reference herein to Exhibit 10.2 of ISA’s Report on Form 10-Q for the quarter ended March 31, 2010, as filed on May 10, 2010.

10.14	**	Promissory Note, dated April 13, 2010, in the amount of $20,000,000 payable to Branch Banking and Trust Company is incorporated by reference herein to Exhibit 10.3 of ISA’s Report on Form 10-Q for the quarter ended March 31, 2010, as filed on May 10, 2010.

10.15	**	Addendum to Promissory Note dated April 13, 2010 is incorporated by reference herein to Exhibit 10.4 of ISA’s Report on Form 10-Q for the quarter ended March 31, 2010, as filed on May 10, 2010.

10.16	**	Modification and Cross-Collateralization Agreement, dated April 13, 2010, among ISA, ISA Real Estate, LLC, ISA Indiana Real Estate, LLC, 7021 Grade Lane, LLC and Branch Banking and Trust Company is incorporated by reference herein to Exhibit 10.5 of ISA’s Report on Form 10-Q for the quarter ended March 31, 2010, as filed on May 10, 2010.

10.17	**	ISA Asset Purchase Agreement, dated July 1, 2010, by and between ISA and Venture Metals, LLC, of Florida is incorporated by reference herein to Exhibit 10.6 of ISA’s Report on Form 10-Q for the quarter ended March 31, 2010, as filed on May 10, 2010.

10.18	**	Amended and Restated Executive Employment Agreement, dated April 1, 2010, by and between ISA and Brian Donaghy is incorporated by reference herein to Exhibit 10.7 of ISA’s Report on Form 10-Q for the quarter ended March 31, 2010, as filed on May 10, 2010.

10.19	**	Amended and Restated Executive Employment Agreement, dated July 1, 2010, by and between ISA and Steve Jones is incorporated by reference herein to Exhibit 10.1 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2010, as filed on August 9, 2010.

10.20	**	Amended and Restated Executive Employment Agreement, dated July 1, 2010, by and between ISA and Jeff Valentine is incorporated by reference herein to Exhibit 10.2 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2010, as filed on August 9, 2010.

10.21	**	Amendment to the Asset Purchase Agreement of Venture Metals, LLC, dated July 1, 2010, by and between ISA and Venture Metals, LLC, of Florida is incorporated by reference herein to Exhibit 10.3 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2010, as filed on August 9, 2010.

10.22	**	Credit Agreement, dated July 30, 2010, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.4 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2010, as filed on August 9, 2010.

10.23	**	Schedule 5.22 to Credit Agreement is incorporated by reference herein to Exhibit 10.5 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2010, as filed on August 9, 2010.

10.24	**	Revolving Loan Note, dated July 30, 2010, in the amount of $40,000,000 payable to Fifth Third Bank is incorporated by reference herein to Exhibit 10.6 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2010, as filed on August 9, 2010.

10.25	**	Term Loan Note, dated July 30, 2010, in the amount of $8,800,000 payable to Fifth Third Bank is incorporated by reference herein to Exhibit 10.7 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2010, as filed on August 9, 2010.


Exhibit Number		Description of Exhibits


10.26	**	Security Agreement, dated as of July 30, 2010, by and among Fifth Third Bank, Computerized Waste Systems, LLC, ISA Indiana Real Estate, LLC, ISA Logistics LLC, ISA Real Estate LLC, ISA Recycling, LLC, Waste Equipment Sales & Service Co., LLC, 7021 Grade Lane LLC, 7124 Grade Lane LLC, and 7200 Grade Lane LLC is incorporated by reference herein to Exhibit 10.8 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2010, as filed on August 9, 2010.

10.27	**	Guaranty, dated as of July 30, 2010, by Computerized Waste Systems, LLC, ISA Indiana Real Estate, LLC, ISA Logistics LLC, ISA Real Estate LLC, ISA Recycling, LLC, Waste Equipment Sales & Service Co., LLC, 7021 Grade Lane LLC, 7124 Grade Lane LLC, and 7200 Grade Lane LLC is incorporated by reference herein to Exhibit 10.9 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2010, as filed on August 9, 2010.

10.28	**	Pledge Agreement, dated as of July 30, 2010, between Industrial Services of America, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.10 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2010, as filed on August 9, 2010.

10.29	**	Promissory Note, dated April 12, 2011, in the amount of $226,855 payable to Fifth Third Bank is incorporated by reference herein to Exhibit 10.1 of ISA’s Report on Form 10-Q for the quarter ended March 31, 2011, as filed on May 2, 2011.

10.30	**	Loan and Security Agreement dated April 12, 2011, by and between Fifth Third Bank and Industrial Services of America, Inc. is incorporated by reference herein to Exhibit 10.2 of ISA’s Report on Form 10-Q for the quarter ended March 31, 2011, as filed on May 2, 2011.

10.31	**	First Amendment to Credit Agreement, dated April 14, 2011, by and among Industrial Services of America, Inc., ISA Indiana, Inc., and Fifth Third Bank is incorporated by reference herein to Exhibit 10.3 of ISA’s Report on Form 10-Q for the quarter ended March 31, 2011, as filed on May 2, 2011.

10.32	**	Reaffirmation and Amendment of Guaranty and Reaffirmation of Security, dated April 14, 2011, by and among Fifth Third Bank, ISA Indiana Real Estate, LLC, ISA Logistics LLC, ISA Real Estate, LLC, 7021 Grade Lane LLC, 7124 Grade Lane LLC, 7200 Grade Lane LLC, Computerized Waste Systems, LLC, ISA Recycling LLC, and Waste Equipment Sales & Service Co., LLC is incorporated by reference herein to Exhibit 10.4 of ISA’s Report on Form 10-Q for the quarter ended March 31, 2011, as filed on May 2, 2011.

10.33	**	Amended and Restated Revolving Loan Note, dated April 14, 2011, in the amount of $45,000,000 payable to Fifth Third Bank is incorporated by reference herein to Exhibit 10.5 of ISA’s Report on Form 10-Q for the quarter ended March 31, 2011, as filed on May 2, 2011.

10.34	**	First Amendment to Credit Agreement, dated November 15, 2010 by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.1 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.

10.35	**	Promissory Note, dated October 13, 2010, in the amount of $1,320,240 payable to Fifth Third Bank, and Loan and Security Agreement, dated October 13, 2010, by and between Fifth Third Bank and Industrial Services of America, Inc. is incorporated by reference herein to Exhibit 10.2 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.

10.36	**	Exhibit A of First Amendment to Credit Agreement, dated April 14, 2011: Amended and Restated Revolving Loan Note, dated April 14, 2011, in the amount of $45,000,000 payable to Fifth Third Bank is incorporated by reference herein to Exhibit 10.3 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.

10.37	**	Schedules 1.1 through 8.11 of Credit Agreement, dated July 30, 2010, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.5 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.


Exhibit Number		Description of Exhibits


10.38	**	Exhibit A (Advance Request and Borrowing Notice) of Credit Agreement, dated July 30, 2010, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.6 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.

10.39	**	Exhibit B (Borrowing Base Certificate) of Credit Agreement, dated July 30, 2010, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.7 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.

10.40	**	Exhibit C-1 (Form of Borrower Security Agreement) of Credit Agreement, dated July 30, 2010, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.8 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.

10.41	**	Exhibit C-2 (Form of Guarantor Security Agreement) of Credit Agreement, dated July 30, 2010, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.9 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.

10.42	**	Exhibit D (Compliance Certificate) of Credit Agreement, dated July 30, 2010, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.10 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.

10.43	**	Exhibit E (Form of Pledge Agreement) of Credit Agreement, dated July 30, 2010, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.11 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.

10.44	**	Exhibit F (Form of Revolving Loan Note) of Credit Agreement, dated July 30, 2010, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.12 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.

10.45	**	Exhibit G (Form of Term Loan Note) of Credit Agreement, dated July 30, 2010, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.13 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.

10.46	**	Exhibit H (Form of Guaranty) of Credit Agreement, dated July 30, 2010, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.14 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.

10.47	**	Exhibit I (Form of Agreement Regarding Insurance) of Credit Agreement, dated July 30, 2010, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.15 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.

10.48	**	Exhibit J (Assignment and Assumption) of Credit Agreement, dated July 30, 2010, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.16 of ISA’s Report on Form 10-Q for the quarter ended June 30, 2011, as filed on August 9, 2011.


Exhibit Number		Description of Exhibits


10.49	**	Loan and Security Agreement, dated August 9, 2011, by and between Industrial Services of America, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.1 of ISA’s Report on Form 10-Q for the quarter ended September 30, 2011, as filed on November 14, 2011.

10.50	**	Exhibit A to the Loan and Security Agreement: Promissory Note, including Schedule A, dated August 9, 2011, in the amount of $115,010 payable to Fifth Third Bank is incorporated by reference herein to Exhibit 10.2 of ISA’s Report on Form 10-Q for the quarter ended September 30, 2011, as filed on November 14, 2011.

10.51	**	Second Amendment to Credit Agreement, dated November 15, 2011, by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank is incorporated by reference herein to Exhibit 10.1 of ISA’s Report on Form 8-K, as filed on December 12, 2011.

10.52	**	Amended and Restated Revolving Loan Note, dated November 15, 2011, by Industrial Services of America, Inc. and ISA Indiana, Inc. in favor of Fifth Third Bank is incorporated by reference herein to Exhibit 10.2 of ISA’s Report on Form 8-K, as filed on December 12, 2011.

10.53		Second Amendment to Consulting Agreement, dated as of February 23, 2012, by and between ISA and K&R, LLC.*

10.54		Third Amendment to Credit Agreement, dated as of March 2, 2012 by and among Industrial Services of America, Inc., ISA Indiana, Inc. and Fifth Third Bank.

11		Statement of Computation of Earnings Per Share (See Note 10 to Notes to Consolidated Financial Statements).

31.1		Rule 13a-14(a) Certification of Harry Kletter for the Form 10-K for the year ended December 31, 2011.

31.2		Rule 13a-14(a) Certification of Robert D. Coleman for the Form 10-K for the year ended December 31, 2011.

32.1		Section 1350 Certification of Harry Kletter and Robert D. Coleman for the Form 10-K for the year ended December 31, 2011.

101.INS		XBRL Instance Document***

101.SCH		XBRL Taxonomy Extension Schema Document***

101.CAL		XBRL Taxonomy Extension Calculation Document***

101.DEF		XBRL Taxonomy Extension Definitions Document***

101.LAB		XBRL Taxonomy Extension Labels Document***

101.PRE		XBRL Taxonomy Extension Presentation Document***

*Denotes a management contract of ISA required to be filed as an exhibit pursuant to Item 601(10)(iii) of Regulation S-K under the Securities Act of 1933, as amended.

**Previously filed.

***Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011, 2010 and 2009

CONTENTS


REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		1

FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS		2

CONSOLIDATED STATEMENTS OF INCOME		4

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY		5

CONSOLIDATED STATEMENTS OF CASH FLOWS		6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		7

SUPPLEMENTARY INFORMATION

VALUATION AND QUALIFYING ACCOUNTS		39

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Industrial Services of America, Inc. and Subsidiaries
Louisville, Kentucky

We have audited the accompanying consolidated balance sheets of Industrial Services of America, Inc. and Subsidiaries as of December 31, 2011 and 2010 and the related consolidated statements of income, shareholders’ equity and cash flows for each of the years in the three year period ended December 31, 2011. Our audits also included the financial statement schedule listed in the Index at Item 15(a)2. The financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Industrial Services of America, Inc. and Subsidiaries as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2011, in conformity with U. S. generally accepted accounting principles. Also, in our opinion, the related consolidated financial statements schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

Mountjoy Chilton Medley LLP

Louisville, Kentucky
March 7, 2012

See accompanying notes to consolidated financial statements.

INDUSTRIAL SERVICES OF AMERICA, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2011 and 2010


	2011		2010

	(in thousands)
ASSETS
Current assets
Cash	$	2,267	$	2,468
Income tax receivable		3,967		—
Accounts receivable – trade (after allowance for doubtful accounts of $100.0 thousand in 2011 and 2010) (Note 1)		17,191		27,449
Net investment in sales-type leases (Note 5)		40		33
Inventories (Note 1)		18,544		34,311
Deferred income taxes (Note 4)		411		942
Prepaid expenses		328		392
Employee loans		6		7

Total current assets		42,754		65,602

Net property and equipment		26,199		27,554

Other assets
Net investment in sales-type leases (Note 5)		—		40
Notes receivable – related party (Note 6)		45		88
Goodwill (Note 1)		6,840		6,840
Intangible assets, net (Note 1)		5,025		5,775
Other assets		107		263

Total other assets		12,017		13,006

Total assets	$	80,970	$	106,162

See accompanying notes to consolidated financial statements.

INDUSTRIAL SERVICES OF AMERICA, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2011 and 2010


	2011			2010

	(in thousands)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt (Note 3)	$	1,821		$	1,824
Accounts payable		10,681			11,406
Income tax payable		—			2,909
Interest rate swap agreement liability (Note 1)		484			650
Accrued bonuses		—			1,175
Other current liabilities		331			320

Total current liabilities		13,317			18,284

Long-term liabilities
Long-term debt (Note 3)		26,688			43,623
Deferred income taxes (Note 4)		3,406			3,373

Total long-term liabilities		30,094			46,996

Shareholders’ equity
Common stock, $0.0033 par value: 10,000,000 shares authorized, 7,192,479 and 7,192,500 shares issued in 2011 and 2010, respectively, 6,940,517 and 6,789,917 shares outstanding in 2011 and 2010, respectively		24			24
Additional paid-in capital		18,131			17,852
Retained earnings		20,057			23,938
Accumulated other comprehensive loss		(290	)		(353	)
Treasury stock at cost, 251,962 and 402,583 shares in 2011 and 2010, respectively		(363	)		(579	)

Total shareholders’ equity		37,559			40,882

Total liabilities and shareholders’ equity	$	80,970		$	106,162

See accompanying notes to consolidated financial statements.

INDUSTRIAL SERVICES OF AMERICA, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2011, 2010 and 2009


	2011			2010			2009

	(in thousands, except per share information)
Revenue from services	$	5,279		$	6,212		$	7,095
Revenue from product sales		271,591			336,793			173,957

Total Revenue		276,870			343,005			181,052

Cost of goods sold for services		4,716			5,401			5,514
Cost of goods sold for product sales		260,450			310,319			155,245
Inventory adjustment for lower cost or market		3,441			—			—

Total Cost of goods sold		268,607			315,720			160,759

Selling, general and administrative expenses		12,720			13,737			10,488


(Loss) income before other income (expense)		(4,457	)		13,548			9,805

Other income (expense)
Interest expense		(2,025	)		(1,473	)		(1,096	)
Interest income		19			29			32
Gain on sale of assets		107			281			74
Other (loss) income, net		(566	)		41			(29	)

Total other expense		(2,465	)		(1,122	)		(1,019	)


(Loss) income before income taxes		(6,922	)		12,426			8,786

Income tax (benefit) provision (Note 4)		(3,041	)		4,373			3,501


Net (loss) income	$	(3,881	)	$	8,053		$	5,285


Basic (loss) earnings per share	$	(0.56	)	$	1.22		$	0.91


Diluted (loss) earnings per share	$	(0.56	)	$	1.21		$	0.91

See accompanying notes to consolidated financial statements.

INDUSTRIAL SERVICES OF AMERICA, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Years ended December 31, 2011, 2010 and 2009


						Additional Paid-in Capital						Accumulated Other Comprehensive Loss
	Common Stock								Retained Earnings						Treasury Stock

	Shares			Amount											Shares			Cost			Total

(in thousands, except share information)
Balance as of January 1, 2009		6,442,500		$	21	$	3,743		$	10,600		$	(475	)		(1,079,562	)	$	(1,548	)	$	12,341

Net unrealized income on derivative instruments, net of tax		—			—		—			—			137			—			—			137

Stock bonuses		—			—		37			—			—			16,500			23			60

Purchase of real estate (3409 Camp Ground Road)		—			—		370			—			—			300,000			430			800

Purchase of real estate (7124 & 7200 Grade Lane)		750,000			3		3,197			—			—			—			—			3,200

Stock option distribution to Directors		—			—		95			—			—			—			—			95

Net income		—			—		—			5,285			—			—			—			5,285


Balance as of December 31, 2009		7,192,500			24		7,442			15,885			(338	)		(763,062	)		(1,095	)		21,918

Net unrealized loss on derivative instruments, net of tax		—			—		—			—			(15	)		—			—			(15	)

Stock bonuses		—			—		417			—			—			60,479			86			503

Purchase of intangibles		—			—		2,693			—			—			300,000			430			3,123

Contingent consideration		—			—		7,300			—			—			—			—			7,300

Net Income		—			—		—			8,053			—			—			—			8,053


Balance as of December 31, 2010		7,192,500			24		17,852			23,938			(353	)		(402,583	)		(579	)		40,882

Net unrealized income on derivative instruments, net of tax		—			—		—			—			63			—			—			63

Stock bonuses		—			—		409			—			—			60,600			86			495

Venture Metals, LLC - contingent consideration		—			—		(130	)		—			—			90,000			130			—

Reclass fractional shares purchased after stock split		(21	)		—		—			—			—			21			—			—

Net loss		—			—		—			(3,881	)		—			—			—			(3,881	)


Balance as of December 31, 2011		7,192,479		$	24	$	18,131		$	20,057		$	(290	)		(251,962	)	$	(363	)	$	37,559

See accompanying notes to consolidated financial statements.

INDUSTRIAL SERVICES OF AMERICA, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2011, 2010 and 2009


	2011			2010			2009

	(in thousands)
Cash flows from operating activities
Net (loss) income	$	(3,881	)	$	8,053		$	5,285
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		4,517			3,887			2,799
Inventory write-down		3,441			—			—
Stock bonus to employees		495			504			60
Stock options to Directors		—			—			95
Deferred income taxes		459			(196	)		2,899
Provision for doubtful accounts		—			—			(390	)
Gain on sale of property and equipment		(107	)		(281	)		(74	)
Change in assets and liability
Receivables		10,259			(18,937	)		(4,311	)
Net investment in sales-type leases		33			28			25
Inventories		12,325			(7,884	)		(12,946	)
Other assets		226			(67	)		(166	)
Income tax receivable		(3,967	)		—			—
Accounts payable		(724	)		6,721			982
Accrued bonuses		(1,175	)		(339	)		1,459
Accrued legal		7			29			(988	)
Income tax payable		(2,909	)		2,749			(48	)
Other current liabilities		5			(92	)		(233	)

Net cash from (used in) operating activities		19,004			(5,825	)		(5,552	)
Cash flows from investing activities
Proceeds from sale of property and equipment		183			376			111
Purchases of property and equipment		(2,456	)		(3,876	)		(1,042	)
Deposits on equipment		(37	)		(193	)		(290	)
Payments for shredder system		—			—			(6,527	)
Acquisition from Venture Metals		—			—			(11,875	)
Payments from related party		43			41			39

Net cash used in investing activities		(2,267	)		(3,652	)		(19,584	)
Cash flows from financing activities
Payments on capital lease obligation		—			(21	)		(81	)
Proceeds from other long-term debt		—			—			1,499
Net proceeds from Fifth Third Bank		342			45,034			—
Payments on Fifth Third Bank debt		(17,280	)		—			—
(Payments on) Proceeds from note payable to BB&T		—			(5,000	)		5,000
Payments on other BB&T debt		—			(28,499	)		(625	)
Payments on other long-term debt		—			(282	)		(1,732	)
Proceeds from BB&T		—			—			20,684

Net cash (used in) from financing activities		(16,938	)		11,232			24,745
Net change in cash		(201	)		1,755			(391	)
Cash at beginning of year		2,468			713			1,104

Cash at end of year	$	2,267		$	2,468		$	713

Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,025		$	1,473		$	1,096
Cash paid for taxes		3,385			1,946			749

Supplemental disclosure of noncash investing and financing activities:
Common stock issued to acquire real estate	$	—		$	—		$	4,000
Common stock issued to acquire intangibles		—			3,123			—
Contingent consideration		—			7,300			—

See accompanying notes to consolidated financial statements.

INDUSTRIAL SERVICES OF AMERICA, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011, 2010, and 2009

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business: The Recycling division of Industrial Services of America, Inc. and its subsidiaries (ISA) purchases and sells ferrous and nonferrous materials, including stainless steel, and fiber scrap on a daily basis at our two wholly owned subsidiaries, ISA Recycling, LLC (located in Louisville, Kentucky) and ISA Indiana, Inc. (serving southern Indiana). We expanded this division into the stainless steel recycling market for super alloys and high-temperature metals in 2009. The multi-million dollar shredder project, completed in June 2009, expands our processing capacity, offers specialty grades of scrap and improves end-product quality. The shredder began operations on July 1, 2009. Through the Waste Services division (see the Segment information at Note 12), ISA also provides products and services to meet the waste management needs of its customers related to ferrous, non-ferrous and corrugated scrap recycling, management services and waste equipment sales and rental. This division represents contracts with retail, commercial and industrial businesses to handle their waste disposal needs, primarily by subcontracting with commercial waste hauling and disposal companies. Our customers and subcontractors are located throughout the United States. This division also installs or repairs equipment and rental equipment on a timely basis. Each of our segments bills separately for its products or services. Generally, services and products are not bundled for sale to individual customers. The products or services have value to the customer on a standalone basis.

Revenue Recognition: ISA records revenue for its recycling and equipment sales divisions upon delivery of the related materials and equipment to the customer. We provide installation and training on all equipment and we charge these costs to the customer, recording revenue in the period we provide the service. We are the middleman in the sale of the equipment and not a manufacturer. Any warranty is the responsibility of the manufacturer and therefore we make no estimates for warranty obligations. Allowances for equipment returns are made on a case-by-case basis. Historically, returns of equipment have not been material.

Our management services group provides our customers with evaluation, management, monitoring, auditing and cost reduction of our customers’ non-hazardous solid waste removal activities. We recognize revenue related to the management aspects of these services when we deliver the services. We record revenue related to this activity on a gross basis because we are ultimately responsible for service delivery, have discretion over the selection of the specific service provided and the amounts to be charged, and are directly obligated to the subcontractor for the services provided. We are an independent contractor. If we discover that third party service providers have not performed, either by auditing of the service provider invoices or communications from our customers, we then resolve the service delivery dispute directly with the third party service supplier.

We record sales-type leases at the net present value of future minimum lease payments. Interest income related to the lease is recognized over the life of the lease. At the inception of the lease, any difference between the net present value of future cash flows and the basis of the leased asset (carrying value plus initial direct costs, less present value of any residual) is recorded as a gain or

loss.

Cash and Cash Equivalents: Cash and cash equivalents includes cash in banks with original maturities of three months or less. Cash and cash equivalents are stated at cost which approximates market value, which in the opinion of management, are subject to an insignificant risk of loss in value. We maintain a cash account on deposit with BB&T which serves as collateral for our interest rate swap agreements. This compensating balance arrangement is verbal only and does not legally restrict the use of these funds. As of December 31, 2011, the balance in this account was $653.1 thousand.

Accounts Receivable and Allowance for Doubtful Accounts: Accounts receivable consists primarily of amounts due from customers from product and brokered sales. The allowance for doubtful accounts totaled $100.0 thousand at December 31, 2011 and December 31, 2010. Our determination of the allowance for doubtful accounts includes a number of factors, including the age of the balance, past experience with the customer account, changes in collection patterns and general economic and industry conditions. Interest is not normally charged on receivables nor do we normally require collateral for receivables. Potential credit losses from our significant customers could adversely affect our results of operations or financial condition. While we believe our allowance for doubtful accounts is adequate, changes in economic conditions or any weakness in the steel and metals industry could adversely impact our future earnings. In general, we consider accounts receivable past due 30 to 60 days after the invoice date. We charge off losses to the allowance when we deem further collection efforts will not provide additional recoveries.

Major Customer: North American Stainless (NAS) is a major customer in our Recycling segment. Sales to NAS equaled 44.4% of our consolidated revenue in 2011, and 63.7% of our consolidated revenue in 2010, and the loss of NAS would have a material adverse effect on our financial statements. The accounts receivable balance from NAS was $8.5 million and $13.6 million as of December 31, 2011 and 2010, respectively.

Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, ISA Indiana, Inc., ISA Recycling, LLC, Industrial Logistics, and ISA Alloys. Upon consolidation, all intercompany accounts, transactions and profits have been eliminated.

Common Control: We conduct significant levels of business (see Note 6) with K&R, LLC (“K&R”), which is owned by ISA’s chief executive officer and principal shareholder. Because these entities are under common control, our operating results or our financial position may be materially different from those that would have been obtained if the entities were autonomous.

Estimates: In preparing the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America, management must make estimates and assumptions. These estimates and assumptions affect the amounts reported for assets, liabilities, revenues and expenses, as well as affecting the disclosures provided. Examples of estimates include the allowance for doubtful accounts, estimates associated with annual goodwill impairment tests, and estimates of deferred income tax and liabilities. The Company also uses estimates when assessing fair values of assets and liabilities acquired in business acquisitions as well as any fair value and any related impairment charges related to the carrying value of machinery and equipment, and other long-lived assets. Despite the Company’s intention to establish accurate estimates and use reasonable assumptions, actual results may differ from these

estimates.

Inventories: Our inventories primarily consist of ferrous and non-ferrous, including stainless steel, scrap metals and fiber scrap and are valued at the lower of average purchased cost or market using the specific identification method. Quantities of inventories are determined based on our inventory systems and are subject to periodic physical verification using estimation techniques including observation, weighing and other industry methods. We recognize inventory impairment when the market value, based upon current market pricing, falls below recorded value or when the estimated volume is less than the recorded volume of inventory. We record the loss in cost of goods sold in the period during which we identified the loss.

We make certain assumptions regarding future demand and net realizable value in order to assess whether inventory is properly recorded at the lower of cost or market. We base our assumptions on historical experience, current market conditions and current replacement costs. If the anticipated future selling prices of scrap metal and finished steel products should decline, we would re-assess the recorded net realizable value of our inventory and make any adjustments we feel necessary in order to reduce the value of our inventory (and increase cost of goods sold) to the lower of cost or market. In the third quarter of 2011, demand and prices for inventory decreased due to reduced demand for stainless steel arising from weakening economic conditions, which led to a reduction in stainless steel sales volumes and average stainless steel selling prices. In addition, continued weak demand and the impact of declines in anticipated future selling prices which outpaced the decline in inventory costs, resulted in ISA recording a non-cash net realizable value (“NRV”) inventory write-down of $3.4 million.

Some commodities are in saleable condition at acquisition. We purchase these commodities in small amounts until we have a truckload of material available for shipment. Some commodities are not in saleable condition at acquisition. These commodities must be torched, sheared, shredded or baled. We do not have work-in-process inventory that needs to be manufactured to become finished goods. We include processing costs in inventory for all commodities by gross ton.


	December 31, 2011

	Raw Materials		Finished Goods		Processing Costs		Total

	(in thousands)
Stainless steel, ferrous and non-ferrous materials	$	14,633	$	1,409	$	777	$	16,819
Waste equipment machinery		—		39		—		39
Other		—		63		—		63


Total inventories for sale		14,633		1,511		777		16,921

Replacement parts		1,623		—		—		1,623


Total inventories	$	16,256	$	1,511	$	777	$	18,544


	December 31, 2010

	Raw Materials		Finished Goods		Processing Costs		Total

	(in thousands)
Stainless steel, ferrous and non-ferrous materials	$	30,546	$	1,203	$	1,115	$	32,864
Waste equipment machinery		—		75		—		75
Other		—		59		—		59


Total inventories for sale		30,546		1,337		1,115		32,998

Replacement parts		1,313		—		—		1,313


Total inventories	$	31,859	$	1,337	$	1,115	$	34,311

We charged $777.4 thousand in general and administrative processing costs to cost of sales for the year ended December 31, 2011 and $1.1 million for the year ended December 31, 2010. We charged freight expense to cost of goods sold.

On January 4, 2010, ISA elected to refine its method of valuing its inventory to the specific identification method, whereas in all prior years inventory was valued using the weighted average method. The new method was adopted due to a change in the inventory software, which now provides the ability to specifically track and identify individual scrap metal commodities within the system. This method provides a more accurate value of the inventory and will apply for all future periods. As the previous software did not have this tracking ability, management considers it impracticable to retrospectively apply the method for prior period comparative financial statements, as required by FASB’s authoritative guidance entitled “Accounting Changes and Error Corrections”. This change in inventory valuation method did not have a significant impact on our operations or financial statements.

Inventory also includes all types of industrial waste handling equipment and machinery held for resale such as compactors, balers, and containers. Replacement parts included in Inventory are depreciated over a one-year life and are used by the Company within the one-year period as these parts wear out quickly due to the high-volume and intensity of the shredder function. Other inventory includes miscellaneous equipment, cardboard, fuel, and baling wire.

Property and Equipment: Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the related property. Assets under capital lease obligations would be amortized over the term of the capital lease; as of December 31, 2011, we do not have any assets under capital lease obligations.

Property and equipment, in thousands, as of December 31, 2011 and 2010 consist of the following:


	Life	2011		2010


Land		$	6,026	$	5,872
Equipment and vehicles	1-10 years		26,979		25,733
Office equipment	1-7 years		2,481		2,313
Rental equipment	3-5 years		5,046		5,133
Building and leasehold improvements	5-40 years		8,271		7,733

		$	48,803	$	46,784

Less accumulated depreciation and amortization			22,604		19,230


		$	26, 199	$	27,554

Depreciation expense for the years ended December 31, 2011, 2010 and 2009 was $3.8 million, $3.5 million, and $2.8 million, respectively. Of the $3.8 million depreciation expense recognized in 2011, $2.6 million was recorded in cost of sales, and $1.2 million was recorded in general and administrative expense. Of the $3.5 million depreciation expense recognized in 2010, $2.8 million was recorded in cost of sales, and $0.7 million was recorded in general and administrative expense.

A typical term of our rental equipment leases is five years. The revenue stream is based on monthly usage and recognized in the month of usage. We record purchased rental equipment, including all installation and freight charges, as a fixed asset. We are typically responsible for all repairs and maintenance expenses on rental equipment. Based on existing agreements, future operating lease revenue from rental equipment for each of the next five years, in thousands, is estimated to be:


2012	$	1,489
2013		1,017
2014		759
2015		535
2016		214

	$	4,014

Goodwill and Other Intangible Assets: Goodwill and certain intangible assets are no longer amortized but are assessed at least annually for impairment with any such impairment recognized in the period identified. We perform our annual goodwill impairment test internally at December 31 and at the level of the recycling reporting units to which all the goodwill is related. We determine whether to impair goodwill by comparing the fair value of the recycling reporting unit as a whole (the present value of expected cash flows) to its carrying value including goodwill. Since the recycling reporting unit’s fair value exceeds its carrying value, no further computations are required. See also Note 13 – “Purchase of Inventory, Fixed Assets, and Intangible Assets of Venture Metals, LLC” for additional information on the purchased intangibles and the goodwill valuation performed by an outside service.

Intangibles: Purchased intangible assets are initially recorded at cost and finite life intangible assets are amortized over their useful economic lives on a straight line basis. Intangible assets having indefinite lives and intangible assets that are not yet ready for use are not amortized and are reviewed annually for impairment in accordance with Note 1 – “Summary of Significant Accounting Policies – Fair Value of Financial Instruments.”

Intangible assets are considered to have indefinite lives when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to

generate cash flows for the Company. The factors considered in making this determination include the existence of contractual rights for unlimited terms and the life cycles of the products and processes that depend on the asset. See also Note 13 – “Purchase of Inventory, Fixed Assets, and Intangible Assets of Venture Metals, LLC” for additional information on the purchased intangibles.

We have the following intangible assets, in thousands, as of December 31, 2011:


	Gross Carrying Value		Accumulated Amortization			Net Carrying Value

Amortized intangible assets
Venture Metals, LLC trade name	$	730	$	(219	)	$	511
Non-compete agreements		620		(186	)		434
Venture Metals, LLC customer list		4,800		(720	)		4,080


Total intangible assets	$	6,150	$	(1,125	)	$	5,025

We amortize the trade name and non-compete agreements using a method that reflects the pattern in which the economic benefits are consumed or otherwise used over a 5-year life as stated in the agreements. We amortize the customer list on a straight-line basis over a 10-year life as estimated by management. We incurred amortization expense related to these assets of $750.0 thousand and $375.0 thousand for the years ended December 31, 2011 and 2010, respectively. We did not incur any amortization expense for the year ended December 31, 2009.

As of December 31, 2011, we expect amortization expense, in thousands, for these assets for the next five fiscal years and thereafter to be as follows:


Year	Balance - Beginning of Year		Amortization			Balance - End of Year


2012	$	5,025	$	(750	)	$	4,275
2013		4,275		(750	)		3,525
2014		3,525		(750	)		2,775
2015		2,775		(615	)		2,160
2016		2,160		(480	)		1,680
Thereafter		1,680		(1,680	)		—

Derivative and Hedging Activities: The FASB’s authoritative guidance titled “Accounting for Derivative Instruments and Hedging Activities”, and subsequent amendments (hereinafter collectively referred to FASB’s guidance), contain numerous requirements including the recognition of derivative instruments in the financial statements at fair value. Derivatives that are not hedges must be adjusted to fair value through the statement of operations. If the derivative meets the requirements for hedge accounting in accordance with FASB’s guidance, depending on the nature of the hedge, changes in the fair value of the derivative are either offset against the

corresponding change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value is immediately recognized in the statement of operations. We include the required disclosures in Note 3 – “Notes Payable to Bank” of our Notes to Consolidated Financial Statements.

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in the statement of operations.

Beginning in October, 2008, we began to utilize derivative instruments in the form of interest rate swaps to assist in managing our interest rate risk. We do not enter into any interest rate swap derivative instruments for trading purposes. We recognize as an adjustment to interest expense the differential paid or received on interest rate swaps. We include in other comprehensive income the change in the fair value of the interest rate swap, which is established as an effective hedge.

Advertising Expense: Advertising costs are charged to expense in the period the costs are incurred. Advertising expense was $83.8 thousand, $218.9 thousand, and $237.8 thousand for the years ended December 31, 2011, 2010, and 2009, respectively.

Accumulated Other Comprehensive Income (Loss): Comprehensive income is net income plus certain other items that are recorded directly to shareholders’ equity. Amounts included in other accumulated comprehensive loss for our derivative instruments are recorded net of the related income tax effects. The following table gives further detail regarding the composition of other accumulated comprehensive income (loss), in thousands, at December 31, 2011 and 2010.


Total accumulated other comprehensive loss as of 1/1/10	$	(338	)
Net unrealized loss on derivative instruments, net of tax, during 2010		(15	)

Total accumulated other comprehensive loss as of 12/31/10		(353	)
Net unrealized gain on derivative instruments, net of tax, during 2011		63

Total accumulated other comprehensive loss as of 12/31/11	$	(290	)

Income Taxes: Deferred income taxes are recorded to recognize the tax consequences on future years of differences between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as “temporary differences”, and for net operating loss carryforwards subject to an ongoing assessment of realizability. Deferred income taxes are measured by applying current tax laws.

The FASB has issued guidance, included in the ASC, related to the accounting for uncertainty in taxes recognized in financial statements. These new standards are effective for annual financial statements for fiscal years beginning after December 15, 2008. The company evaluates its uncertain tax positions and a loss contingency is recognized when it is probable that a liability has been incurred as of the date of the financial statements and the amount of the loss can be reasonably estimated. The amount recognized is subject to estimate and management’s judgment

with respect to the likely outcome for each uncertain tax position. The amount that is ultimately sustained for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. The Company has no uncertain tax positions as of December 31, 2011, 2010, or 2009.

The Company recognizes interest accrued related to unrecognized tax positions in interest expense and penalties in operating expenses, if appropriate. The tax year 2010 remains open to examination by the Internal Revenue Service and certain state taxing jurisdictions to which the Company is subject. The tax years 2008 and 2009 have been examined.

Statement of Cash Flows: The statement of cash flows has been prepared using a definition of cash that includes deposits with original maturities of three months or less. We have reclassified certain cash flow items within the accompanying Consolidated Statements of Cash Flows and Notes to the Financial Statements for prior years in order to be comparable with the current presentation. These reclassifications had no effect on previously reported income.

Earnings Per Share: Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding plus the dilutive effect of stock options.


	2011			2010		2009

	(in thousands, except per share information)
Net (loss) income

Net (loss) income, as reported	$	(3,881	)	$	8,053	$	5,285


Basic (loss) earnings per share

As reported	$	(0.56	)	$	1.22	$	0.91


Diluted (loss) earnings per share

As reported	$	(0.56	)	$	1.21	$	0.91

Stock Option Plans: We have an employee stock option plan under which we may grant options for up to 2,400,000 shares of common stock, which are reserved by the board of directors for issuance of stock options. The exercise price of each option is equal to the market price of our stock on the date of grant. The maximum term of the option is five years.

We accounted for this plan based on FASB’s authoritative guidance entitled “Share-Based Payment”, using the modified prospective method. The impact of accounting for this plan under this guidance on our consolidated results of operations depends on the level of future option grants and the fair value of the options granted at such future dates, as well as the vesting periods provided by such awards. Existing outstanding options did not result in additional compensation expense upon adoption of this guidance since all outstanding options were fully vested. See also Note 14 – “Long Term Incentive Plan” in these Notes to Consolidated Financial Statements for

additional information regarding the Long Term Incentive Plan.

Following is a summary of stock option activity and number of shares reserved for outstanding options for the years ended December 31, 2011, 2010 and 2009:


	Number of Shares		Weighted Average Exercise Price Per Share		Exercise Price Per Share		Maximum Remaining Term of Options Granted		Weighted Average Grant Date Fair Value of Options


Balance as of January 1, 2009		—		—		—		—		—

Granted		90,000	$	4.23	$	4.23		2.5 Years	$	1.05


Balance as of December 31, 2009		90,000	$	4.23	$	4.23		2.5 Years	$	1.05

Granted		—		—		—		—		—

Balance as of December 31, 2010		90,000	$	4.23	$	4.23		2.5 Years	$	1.05


Granted		—		—		—		—		—

Balance as of December 31, 2011		90,000	$	4.23	$	4.23		2.5 Years	$	1.05

On January 6, 2010, the Board of Directors granted non-performance based stock awards of 25,500 shares to management at $6.39 per share. On January 11, 2010, we issued 18,000 shares and on February 11, 2010, we issued the remaining 7,500 shares of this grant. On June 8, 2010, we issued 30,000 shares of our stock granted on April 14, 2009 to management at a grant date fair value of $2.53 per share. On November 15, 2010, we issued 5,000 shares of our stock to management at $10.34 per share. In January 2011, we issued 60,000 shares of our stock granted on April 1, 2010 to management at a grant date fair value of $11.93 per share and 600 shares of our stock to consultants at $12.28 per share.

Fair Value of Financial Instruments: We estimate the fair value of our financial instruments using relevant market information and other assumptions. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, prepayments and other factors. Changes in assumptions or market conditions could significantly affect these estimates. As of December 31, 2011, the estimated fair value of our financial instruments approximated book value. The fair value of our debt approximates its carrying value because the majority of our debt bears a floating rate of interest based on the LIBOR rate. There is no readily available market by which to determine fair market value of our fixed term debt; however, based on existing interest rates and prevailing rates as of each year end, we have determined that the fair value of our fixed rate debt approximates book value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

In accordance with applicable accounting standards, we categorize our financial assets and liabilities into the following fair value hierarchy:


2011:	Level 1		Level 2			Level 3		Total

Assets:
Cash and cash equivalents	$	2,267	$	—		$	—	$	2,267
Goodwill		—		—			6,840		6,840
Net intangible assets		—		—			5,025		5,025

Liabilities
Long term debt	$	—	$	(28,509	)	$	—	$	(28,509	)
Derivative contract		—		(484	)		—		(484	)

2010:		Level 1		Level 2			Level 3		Total

Assets:
Cash and cash equivalents	$	2,468	$	—		$	—	$	2,468
Goodwill		—		—			6,840		6,840
Net intangible assets		—		—			5,775		5,775

Liabilities
Long term debt	$	—	$	(45,447	)	$	—	$	(45,447	)
Derivative contract		—		(650	)		—		(650	)

We have had no transfers in or out of Levels 1 or 2 fair value measurements. Other than standard amortization of intangible assets, we have had no activity in Level 3 fair value measurements for the year ending December 31, 2011. For Level 3 assets, goodwill of $6.8 million is subject to impairment analysis each year end under Phase I of the ASC guidance. We use an annual capitalized earnings computation to evaluate Level 3 assets for impairment. No impairment was recorded as of December 31, 2011, as determined by a third party evaluation. See also Note 13 –“Purchase of Inventory, Fixed Assets, and Intangible Assets of Venture Metals, LLC” for additional information on the third party valuation.

Subsequent Events: We have evaluated the period from December 31, 2011 through the date the financial statements herein were issued, for subsequent events requiring recognition or disclosure in the financial statements and we identified the following events:

Second Amendment to Consulting Agreement with K&R, LLC:
Effective January 1, 2012, the Company and K&R, LLC entered into a Second Amendment to Consulting Agreement (“the Second Amendment”), which amends an April 1, 2010 amendment (the “Amendment”) to a consulting agreement which the parties had entered into effective January 2, 1998 (the “Prior Agreement”). Under the Prior Agreement, the Company engaged K&R as a consultant and retained the services of K&R management personnel to perform planning and consulting services with respect to the Company's businesses, including the preparation of business plans, pro forma budgets, and assistance with general operational issues. The Amendment increased the consulting fees from $240.0 thousand per annum to $480.0 thousand per annum. The Second Amendment reduces the consulting fees from $480.0 thousand per annum to $240.0 thousand per annum. The annual fee is payable in equal monthly installments of $20.0 thousand. The Second Amendment otherwise ratifies the Prior Agreement in all respects. See also Note 6 –“Related Party Transactions” for additional information relating to the Prior Agreement and the Second Amendment.

Third Amendment to Credit Agreement with Fifth Third Bank:
On March 2, 2012, Industrial Services of America, Inc. and ISA Indiana, Inc. (the “Companies”) entered into a Third Amendment to Credit Agreement (the “Third Amendment”) with Fifth Third Bank (the “Bank”) which amended the July 30, 2010 Credit Agreement, including the First Amendment to Credit Agreement dated as of April 14, 2011 and the Second Amendment to Credit Agreement dated as of November 16, 2011, as follows. The Third Amendment redefines the calculation period for the purpose of measuring compliance with our covenants to maintain a ratio of debt to adjusted EBITDA (the “Senior Leverage Ratio”) and a ratio of adjusted EBITDA to aggregate cash payments of interest expense and scheduled payment of principal of not more than 1.20 to 1 (the “Fixed Charge Coverage Ratio”) such that each ratio will be calculated quarterly for the period beginning January 1, 2012 through the end of each quarter of 2012. Prior to the Third Amendment, the ratios were calculated on a rolling 12 month basis. The Third Amendment also changed the Senior Leverage Ratio from 3.5 to 1 in the original Credit Agreement to (i) 4.25 to 1 in the first quarter of 2012, (ii) 3.50 to 1 in the second and third quarter of 2012, and (iii) 3.25 to 1 in the fourth quarter of 2012 and thereafter. The Third Amendment also increased the unused line fee by 0.25% to 0.75% and provided a waiver of the Senior Leverage Ratio and Fixed Charge Coverage Ratio covenant defaults for the quarter ending December 31, 2011. In addition, the Companies also agreed to perform other customary commitments and pay a fee of $10.0 thousand to the Bank. See Note 3 – “Notes Payable to Bank” for additional details relating to this amendment.

Amendment of Articles of Incorporation:
On February 29, 2012, the Company amended its Articles of Incorporation to change the par value of its common stock to $0.0033 per share.

Impact of Recently Issued Accounting Standards: In September 2011, the FASB issued ASU No. 2011-08, an amendment to Topic 350, Intangibles—Goodwill and Other, which simplifies how entities test goodwill for impairment. Previous guidance under Topic 350 required an entity to test goodwill for impairment using a two-step process on at least an annual basis. First, the fair value of a reporting unit was calculated and compared to its carrying amount, including goodwill. Second, if the fair value of a reporting unit was less than its carrying amount, the amount of impairment loss, if any, was required to be measured. Under the amendments in this update, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads the entity to determine that it is more likely than not that its fair value is less than its carrying amount. If after assessing the totality of events or circumstances, an entity determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is unnecessary. If the entity concludes otherwise, then it is required to

test goodwill for impairment under the two-step process as described under paragraphs 350-20-35-4 and 350-20-35-9 under Topic 350. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, the quarter ending March 31, 2012 for us, and early adoption is permitted. We do not expect the adoption of ASU 2011-08 will have a material impact on our Condensed Consolidated Financial Statements.

In June 2011, the FASB issued ASU 2011-05, which is an update to Topic 220, “Comprehensive Income”. This update eliminates the option of presenting the components of other comprehensive income as part of the statement of changes in stockholders’ equity, requires consecutive presentation of the statement of net income and other comprehensive income and requires reclassification adjustments from other comprehensive income to net income to be shown on the financial statements. ASU 2011-05 is effective for all interim and annual reporting periods beginning after December 15, 2011, the quarter ending March 31, 2012 for us. However, ASU 2011-12 has deferred the specific requirement within ASU 2011-05 to present on the face of the financial statements items that are reclassified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income. Entities should continue to report reclassifications out of accumulated comprehensive income consistent with the presentation requirements in effect before ASU 2011-05. We do not expect a material impact on our financials due to the implementation of this guidance. As ASU No. 2011-05 relates only to the presentation of Comprehensive Income, the Company does not expect the adoption of this update will have a material effect on its consolidated financial statements.

NOTE 2 – STOCK DIVIDEND

On May 3, 2010, the Board of Directors declared a 3-for-2 stock split effected by a 50% stock dividend. The stock dividend was issued to holders of record as of May 17, 2010, and paid June 1, 2010. All share prices in these Notes have been adjusted to reflect the impact of this stock split.

NOTE 3 - NOTES PAYABLE TO BANK

On March 2, 2012, Industrial Services of America, Inc. and ISA Indiana, Inc. (the “Companies”) entered into a Third Amendment to Credit Agreement (the “Third Amendment”) with Fifth Third Bank (the “Bank”) which amended the July 30, 2010 Credit Agreement (the “Credit Agreement”), including the First Amendment to Credit Agreement dated as of April 14, 2011 (the “April Amendment”) and the Second Amendment to Credit Agreement dated as of November 16, 2011 (the “November Amendment”), as follows. The Third Amendment redefines the calculation period for the purpose of measuring compliance with our covenant to maintain a ratio of debt to adjusted EBITDA (the “Senior Leverage Ratio”) and a ratio of adjusted EBITDA to aggregate cash payments of interest expense and scheduled payment of principal of not more than 1.20 to 1 (the “Fixed Charge Coverage Ratio”) such that each ratio will be calculated quarterly for the period beginning January 1, 2012 through the end of each quarter of 2012. Prior to the Third Amendment, the ratios were calculated on a rolling 12 month basis. The Third Amendment also changed the Senior Leverage Ratio from 3.5 to 1 in the original Credit Agreement to (i) 4.25 to 1 in the first quarter of 2012, (ii) 3.50 to 1 in the second and third quarter of 2012, and (iii) 3.25 to 1 in the fourth quarter of 2012 and thereafter. The Third Amendment also increased the unused line fee by 0.25% to 0.75% and provided a waiver of the Senior Leverage Ratio and Fixed Charge Coverage Ratio covenant defaults for the quarter ending December 31, 2011, as discussed below. In addition, the Companies also agreed to perform other customary commitments and pay a fee of $10.0 thousand to the Bank.

On April 14, 2011, we entered into the April Amendment with the Bank which amends the Credit Agreement as follows: The April Amendment (i) increased the maximum revolving commitment and the maximum amount of eligible inventory advances in the calculation of the borrowing base, (ii) changed the due date of the first excess cash flow payment to April 30, 2012, and (iii) amended certain other provisions of the Credit Agreement and certain of the other loan documents.

thereon. As security for the term loan, we provided the Bank a first priority security interest in all equipment other than the rental fleet that we own. As of December 31, 2011, the outstanding balance on the term loan was $7.0 million.

In our Credit Agreement with the Bank, we agreed to certain covenants, including (i) maintenance of a ratio of debt to adjusted EBITDA for the preceding 12 months of not more than 3.5 to 1 (or, if measured as of December 31 of any fiscal year, 4.0 to 1), (ii) maintenance of a ratio of adjusted EBITDA for the preceding twelve months to aggregate cash payments of interest expense and scheduled payment of principal in the preceding 12 months of not less than 1.20 to 1, and (iii) a limitation on capital expenditures of $4.0 million in any fiscal year. As of December 31, 2011, we were not in compliance with the covenants in (i) and (ii) above due to decreased sales relating to decreased demand in stainless steel in the last three quarters of the year. As of December 31, 2011, our ratio of debt to adjusted EBITDA was 9.31; our ratio of adjusted EBITDA to aggregate cash payments of interest expense and scheduled principal payments was (0.70), and our capital expenditures totaled $2.5 million, which includes $36.6 thousand in deposits on equipment. In connection with the Third Amendment, we received a waiver from the Bank for the year ending December 31, 2011 for failing to meet the ratio requirements for covenants (i) and (ii) above. Pursuant to the Third Amendment, the Senior Leverage Ratio will increase to 4.25 to 1 for the period ending March 31, 2012. The Senior Leverage Ratio will then decrease to 3.5 to 1 for the periods ending June 30 and September 30, 2012 and decrease to 3.25 to 1 for the period ending December 31, 2012 and thereafter. The other covenants will remain the same going forward. As of December 31, 2011, we have $19.9 million under our existing credit facilities that we can use based on the bank waiver received.

On April 12, 2011, we entered into a Loan and Security Agreement with Fifth Third Bank (the “Bank”) pursuant to which the Bank agreed to provide the Company with a Promissory Note (the “Note”) in the amount of $226.9 thousand for the purpose of purchasing operating equipment. The interest rate is five and 68/100 percent (5.68%). Principal and interest is payable in 48 equal monthly installments of $5.3 thousand, each due on the 20th day of each calendar month. Payment commenced on the 20th day of May, 2011, and the entire unpaid principal amount, together with all accrued and unpaid interest, charges, fees or other advances, if any, comes due on or before April 20, 2015. As security for the Note, we have granted the Bank a first priority security interest in the equipment purchased with the proceeds of the Note. As of December 31, 2011, the outstanding balance of this loan was $187.1 thousand.

thousand cash as a portion of the purchase price at the time of execution of the asset purchase agreement. We recorded a note payable of $1.0 million with an outstanding balance at December 31, 2011 of $155.9 thousand.

We entered into three interest rate swap agreements swapping variable rates for fixed rates. The first swap agreement covers approximately $4.7 million in debt and commenced April 7, 2009 and matures on April 7, 2014. The second swap agreement covers approximately $2.1 million in debt and commenced October 15, 2008 and matures on May 7, 2013. The third swap agreement covers approximately $457.5 thousand in debt and commenced October 22, 2008 and matures on October 22, 2013. The three swap agreements fix our interest rate at approximately 5.8%. At December 31, 2011, we recorded the estimated fair value of the liability related to the three swaps at approximately $484.2 thousand. We entered into the swap agreements for the purpose of hedging the interest rate market risk for the respective notional amounts. These swap agreements were not affected by the debt restructuring with the Bank. We maintain a cash account on deposit with BB&T which serves as collateral for the swap agreements. See Note 1 – “Summary of Significant Accounting Policies – Derivative and Hedging Activities” for additional information about these derivative instruments.

The following table outlines the notional amounts, in thousands, related to the interest rate swaps as of December 31, 2011:


Notional Amount		Rate

$	4,730		5.89	%
$	2,099		5.65	%
$	457		5.89	%

Our long term debt as of December 31, 2011 and December 31, 2010 consisted of the following:


	2011		2010

	(in thousands)
Revolving credit facility of $40.0 million with Fifth Third Bank. See above description for additional details.	$	20,083	$	35,489

Note payable to Fifth Third Bank in the amount of $8.8 million secured by our rental fleet equipment, our shredder system assets, and a crane. See above description for additional details.		7,015		8,275

Note payable to Fifth Third Bank in the amount of $1.3 million secured by equipment purchased with the proceeds. See above description for additional details.		962		1,271

Loan and Security Agreement payable to Fifth Third Bank in the amount of $227 thousand secured by the equipment purchased with the proceeds. See above description for additional details.		187		—

Note payable to Fifth Third Bank in the amount of $115 thousand secured by the equipment purchased with the proceeds. See above description for additional details.		106		—

Note payable to Paccar Financial Corp. in the amount of $164 thousand secured by one Kenworth truck. Payments are $1,697.68 per month with an effective interest rate of 6.5%. The maturity date under this agreement is September 2011.		—		36

Note payable to ILS for various assets including tractor trailers, trucks and containers. The repayment terms are $20,000 per month for 60 months at a seven percent (7.0%) interest rate. The maturity date under this agreement is August 2012.
		156		376


		28,509		45,447
Less current maturities		1,821		1,824


	$	26,688	$	43,623

The annual maturities of long term debt, in thousands, as of December 31, 2011 are as follows:


2012	$	1,821
2013		26,264
2014		388
2015		36
Thereafter		—


Total	$	28,509

NOTE 4 - INCOME TAXES

The income tax provision (benefit), in thousands, consists of the following for the years ended December 31, 2011, 2010 and 2009:


	2011			2010			2009

Federal
Current	$	(3,373	)	$	3,556		$	364
Deferred		436			54			2,563
IRS Audit Adjustment		622			—			—

		(2,315	)		3,610			2,927
State
Current		(818	)		884			466
Refundable state recycle tax credits		—			(185	)		—
Deferred		92			64			108

		(726	)		763			574


	$	(3,041	)	$	4,373		$	3,501

A reconciliation of income taxes at the statutory rate to the reported provision, in thousands, is as follows:


	2011			2010			2009

Federal income tax at statutory rate	$	(2,468	)	$	4,225		$	2,987
State and local income taxes, net of federal income tax effect		(395	)		599			398
Permanent differences		13			(156	)		7
Other differences		(191	)		(295	)		109

	$	(3,041	)	$	4,373		$	3,501

Significant components of the Company’s deferred tax liabilities and assets, in thousands, as of December 31, 2011 and 2010 are as follows:


	2011			2010

Deferred tax liabilities
Tax depreciation in excess of book	$	(3,505	)	$	(3,402	)
Tax amortization in excess of book		(212	)		(310	)

Gross deferred tax liabilities		(3,717	)		(3,712	)

Deferred tax assets
Property taxes		12			43
Allowance for doubtful accounts		43			43
Book amortization in excess of tax		29			58
Inventory capitalization		217			250
Reserve for CWS		129			129
Bonuses		—			466
Interest rate swap		194			280
Other		98			12

Gross deferred tax assets		722			1,281


Net deferred tax liabilities	$	(2,995	)	$	(2,431	)

The Internal Revenue Service has conducted an examination of the Company’s 2009 income tax return and, per the final report, has proposed changes amounting to approximately $735.0 thousand of additional taxes due for which we expect to receive an invoice early in 2012. This increase arose from the Company’s use of bonus depreciation rules for certain additions to shredding equipment which were determined to be disqualified for bonus depreciation. This additional income tax has been accrued as of December 31, 2011.

This resulting adjustment to 2009 depreciation deductions allowed the Company to file an amended U.S. tax return for 2010, pursuant to which we claim additional depreciation deductions and resulted in a claim for refund of income taxes paid amounting to approximately $113.0 thousand which has also been accrued at December 31, 2011.

We use the deferral method of accounting for the available state tax credits relating to the purchase of the shredder equipment. On December 31, 2010, we had deferred recycling equipment state tax credit carryforwards of $4.2 million relating to this purchase which do not expire. This tax credit is limited to 25 percent of our state income tax liability. Due to the net loss in 2011, there was no available state tax credit in 2011. We used the available credit of $185.1 thousand in 2010.

NOTE 5 - SALES-TYPE LEASES

The Company is the lessor of equipment under sales-type lease agreements having terms of three years, with the lessees having the option to acquire the equipment at the termination of the leases. All costs associated with this equipment are the responsibility of the lessees.

Future lease payments receivable under sales-type leases, in thousands, at December 31, 2011 are as follows:


2012	$	44
Thereafter		—


Minimum lease payments receivable		44
Less unearned income		(4	)


Net investment in sales-type leases		40
Less current portion		(40	)

	$	—

NOTE 6 - RELATED PARTY TRANSACTIONS

The Company enters into various transactions with related parties including the Company’s principal shareholder and an affiliated company owned by the Company’s principal shareholder (K&R). A summary of these transactions, in thousands, is as follows:


	2011		2010		2009

Balance sheet accounts:
Notes receivable	$	45.4	$	88.4	$	129.1


Deposits (included in other long-term assets)	$	62.1	$	62.1	$	62.1


Income statement activity:
Rent expense (property)	$	582.0	$	582.0	$	582.0


Lease expense (equipment)	$	101.0	$	5.5	$	—


Consulting fees	$	480.0	$	420.0	$	240.0

ISA leases its corporate offices, processing property and buildings in Louisville, Kentucky for $48.5 thousand per month from K&R pursuant to the K&R Lease. Deposits include one month of the original lease agreement’s rent in advance in the amount of $42.1 thousand. In 2004, we paid for repairs totaling $302.2 thousand that we made to the buildings and property that we lease from K&R, located at 7100 Grade Lane, Louisville, Kentucky. K&R executed an unsecured promissory note, dated March 25, 2005, but effective December 31, 2004, to us for the principal sum of $302.2 thousand. In January 2006, K&R began making payments on the promissory note of principal only in ninety-six (96) monthly installments of $3.1 thousand each. Failure of K&R to make any payment when due under this note within fifteen (15) days of its due date shall constitute a default. After the fifteen day period, the note shall bear interest at a rate equal to fifteen percent (15.0%) per annum and we have the right to exercise our remedies to collect full payment of the note.

In an addendum to the K&R lease as of January 1, 2006, the rent was increased $4.0 thousand as a result of the improvements made to the property in 2004. For years 2011, 2010, and 2009, the payments to K&R by the Company of $4.0 thousand for additional rent and the payment from K&R to the Company of $3.9 thousand for the promissory note were offset.

Effective January 1, 2012, the Company and K&R entered into an agreement (the “Second Amendment”) which amends an April 1, 2010 amendment (the “Amendment) to a consulting agreement which the parties had entered into effective January 2, 1998 (the “Prior Agreement”). Under the Prior Agreement, the Company engaged K&R as a consultant and retained the services of K&R management personnel to perform planning and consulting services with respect to the Company’s businesses, including the preparation of business plans, pro forma budgets, and assistance with general operational issues. The Prior Agreement provided for a term of ten years, with an automatic renewal for additional terms of one year on January 1 of each successive calendar year unless either party provides the other party with written notice of its intent not to renew at least six months prior to the expiration of the then existing term. The Company’s Chief Executive Officer, Harry Kletter, is a member of Kletter Holding, LLC, which is the sole member of K&R. The Amendment increased the consulting fees from $240.0 thousand per annum to $480.0 thousand per annum. The Second Amendment reduces the consulting fees from $480.0 thousand per annum to $240.0 thousand per annum. The annual fee is payable in equal monthly installments of $20.0 thousand. The Second Amendment otherwise ratifies the Prior Agreement in all respects. Deposits include one month of the original agreement’s consulting services in advance in the amount of $20.0 thousand. Our Chairman is compensated through these consulting fees. In 2011, we extended this consulting agreement for one year according to the terms of the contract.

Effective December 1, 2010, the Company and K&R entered into a lease agreement, under which the Company leases equipment from K&R for a monthly payment of $5.5 thousand for 5 years.

Effective June 1, 2011, the Company and K&R entered into a lease agreement, under which the Company leases equipment from K&R for a monthly payment of $5.0 thousand for 5 years.

Other related-party transactions are as follows:

Amendment to Brian Donaghy’s employment agreement: Effective April 1, 2010, the Company amended and restated the employment agreement of Brian Donaghy (“Mr. Donaghy”), the Company’s President and Chief Operating Officer, to (a) extend the term to June 30, 2015, and (b) provide for (i) an annual bonus based on the Company’s achievement of certain return on net asset (“RONA”) targets pursuant to incentive plans to be established by the Company, to be payable in cash or partly in Common Stock at the election of Mr. Donaghy, (ii) a bonus of up to 15,000 shares of Common Stock per annum based on the Company’s achievement of certain RONA targets, and (iii) a one-time bonus of up to 225,000 shares of Common Stock based on the Company’s achievement of certain 5 year RONA targets as measured on December 31, 2014.

Purchase of Venture Metals, LLC Intangibles: On March 26, 2010, we entered into an agreement dated July 1, 2010, subject to shareholder approval of certain issuances of shares of our common stock. After shareholder approval of the issuance of 300,000 shares of our common stock, on July 1, 2010, we entered into an asset purchase agreement and a non-compete agreement with Venture Metals, LLC (“Venture”), 3409 Camp Ground Road, Louisville, KY 40211. Pursuant to the asset purchase agreement dated July 1, 2010, in consideration for the transfer of the Venture name and entry into the Non-Compete Agreement, we delivered to Venture 300,000 shares of our common stock based on a price of

$10.41 per share (the “Purchase Price”) based on the stock price on July 1, 2010.

The purchase price was negotiated between us and Steve Jones, former co-owner of Venture. Venture was owned by Steve Jones and Jeff Valentine, both of whom were our employees at the time. At the same time as these negotiations took place, we renegotiated all management contracts and employment agreements, including those of Mr. Jones and Mr. Valentine. Mr. Jones’ and Mr. Valentine’s original employment agreements were entered into in connection with our prior purchase of assets from Venture. An outside financial consultant also assessed the transaction to provide an opinion of the fair value of the transaction, which led to a supplemental acquisition dated July 1, 2010, as described below.

On June 16, 2010, the Company and Venture agreed to a supplemental acquisition dated effective July 1, 2010. Pursuant to an understanding memorialized by this agreement, on April 12, 2010, the Company paid Venture $1.3 million commissions earned and accrued in 2009 using the line of credit facility and on July 1, 2010, issued to Venture 300,000 shares of Common Stock, in exchange for Venture’s customer list, the Venture name, Venture’s execution of a non-compete agreement, and Venture’s agreement to cause Mr. Jones and Mr. Valentine to provide the company with non-compete agreements. Based on an independent appraisal, the Company agreed to deliver up to an additional 750,000 shares of ISA Common Stock in accordance with certain terms.

The Company obtained a valuation of Venture’s intangible assets from an outside source. Based on preliminary estimates, we recorded additional goodwill of $4.3 million and decreased the intangible asset by $630.0 thousand as of December 31, 2010. No changes were made to recorded amounts for goodwill or the other amortized intangible items based on this valuation, which was finalized in the second quarter of 2011. Based on a third party review, no impairment was recorded to goodwill as of December 31, 2011.

See Note 13 – “Purchase of Inventory, Fixed Assets, and Intangibles of Venture Metals, LLC” for the material terms of the Non-Compete Agreement and supplemental acquisition details and for additional information relating to the third party valuations performed.

Donaghy Asset Purchase Agreement: During 2007, we entered into an asset purchase agreement for $1.8 million funded primarily by a note payable to Industrial Logistic Services, LLC, the sole member of which is Brian Donaghy, our president and chief operating officer, whereby we pay $20.0 thousand per month for 60 months for various assets including tractor trailers, trucks and containers. The note payable reflects a seven percent (7.0%) interest payment on the outstanding balance plus principal amortization. During 2011 and 2010, we made payments on this note of $240.0 thousand. The outstanding balance at December 31, 2011 was $155.9 thousand.

NOTE 7 - EMPLOYEE RETIREMENT PLAN

We maintain a defined contribution retirement plan under Section 401(k) of the Internal Revenue Code which covers substantially all employees. Eligible employees may contribute a maximum of 15.0% of their annual salary. Under the plan, we match 25.0% of each employee’s voluntary contribution up to 6.0% of their gross salary. The expense under the plan for 2011, 2010 and 2009 was $59.6 thousand, $56.5 thousand, and $48.6 thousand, respectively.

NOTE 8 - LEASE COMMITMENTS

Operating Leases:
We lease our Louisville, Kentucky facility from a related party (see Note 6) under an operating lease expiring December 2012. The rent was adjusted in January 2008 per the agreement to monthly payments of $48.5 thousand through December 2012. In addition, the Company is also responsible for real estate taxes, insurance, utilities and maintenance expense.

We lease equipment from a related party (see Note 6) under operating leases expiring November 2015 and May 2016.

We lease a facility in Dallas, Texas for management services operations. The agreement provided that monthly payments of $2.5 thousand were paid through September 2006. The lease was renewed effective October 1, 2011 for a one-year period with monthly payments of $1.0 thousand.

We leased a facility in Lexington, Kentucky for $4.5 thousand per month; the lease terminated February 10, 2012. We subleased this property for a term commencing March 1, 2007 and ending January 31, 2012 for $4.5 thousand per month.

Future minimum lease payments for operating leases, in thousands, as of December 31, 2011 are as follows:


2012	$	721.2
2013		126.0
2014		126.0
2015		126.0
2016		25.5
Thereafter		—


Future minimum lease payments	$	1,124.7

Total rent expense for the years ended December 31, 2011, 2010 and 2009 was $1.0 million, $968.9 thousand, and $1.1 million, respectively.

Capital Leases:

We made the final payments for the equipment under capital leases in June 2010. We now own the equipment and no longer have any equipment under capital leases.

NOTE 9 - CASH DIVIDEND

In 2011 and 2010, the Board of Directors did not declare a cash dividend.

NOTE 10 – PER SHARE DATA

The computation for basic and diluted earnings per share is as follows:


	2011			2010		2009

	(in thousands, except per share information)
Basic earnings per share
Net (loss) income	$	(3,881	)	$	8,053	$	5,285

Weighted average shares outstanding		6,927			6,622		5,783


Basic (loss) earnings per share	$	(0.56	)	$	1.22	$	0.91


Diluted earnings per share
Net (loss) income	$	(3,881	)	$	8,053	$	5,285

Weighted average shares outstanding		6,927			6,622		5,783
Add dilutive effect of assumed exercising of stock options		—			44		18


Diluted weighted average shares outstanding		6,927			6,666		5,801


Diluted (loss) earnings per share	$	(0.56	)	$	1.21	$	0.91

NOTE 11 - LEGAL PROCEEDINGS

Following the trial, both Lennox and ISA filed motions with the court seeking an award of attorney fees against each other. Lennox also filed a motion requesting an award of pre-judgment interest on the $175.0 thousand verdict. The Court denied both of Lennox’s motions and granted ISA’s motion for attorney fees in the amount of $98.0 thousand against Lennox. No appeal was taken by either party, and a Mutual General Release was signed as part of a final negotiated settlement in which Lennox received $84.5 thousand. A Satisfaction of Judgment was filed with the court on December 28, 2011, and the case is closed.

We have litigation from time to time, including employment-related claims, none of which we currently

believe to be material.

NOTE 12 - SEGMENT INFORMATION

The Company’s operations include two primary segments: Recycling and Waste Services. In prior years, our three primary segments were ISA Recycling, Computerized Waste Systems (CWS), and Waste Equipment Sales & Service (WESSCO). In the first quarter of 2009, we decided to consolidate CWS and WESSCO into one reporting segment because CWS revenues have declined so that this segment is no longer material to our total revenues. We named this combined segment Waste Services because it more accurately reflects that business. Waste Services provides waste disposal services including contract negotiations with service providers, centralized billing, invoice auditing, and centralized dispatching. Waste Services also sells, leases, and services waste handling and recycling equipment. The Recycling segment provides products and services to meet the needs of its customers related to ferrous, non-ferrous and fiber recycling in two locations in the Midwest.

The Company’s two reportable segments are determined by the products and services that each offers. The Recycling segment generates its revenues based on buying and selling of ferrous, non-ferrous, including stainless steel, and fiber scrap. Waste Services’ revenues consist of charges to customers for waste disposal services and equipment sales and lease income. The components of the column labeled “other” are selling, general and administrative expenses that are not directly related to the two primary segments.

The accounting policies of the two segments are the same as those described in the summary of significant accounting policies (Note 1). We evaluate segment performance based on gross profit or loss and the evaluation process for each segment includes only direct expenses and selling, general and administrative costs, omitting any other income and expense and income taxes.


2011	RECYCLING			WASTE SERVICES			OTHER			SEGMENT TOTALS

	(in thousands)
Recycling revenues	$	269,459		$	—		$	—		$	269,459
Equipment sales, service and leasing revenues		—			2,132			—			2,132
Management fees		—			5,279			—			5,279
Cost of goods sold		(259,692	)		(5,474	)		—			(265,166	)
Inventory adjustment for lower of cost or market		(3,441	)		—			—			(3,441	)
Selling, general, and administrative expenses		(8,137	)		(808	)		(3,775	)		(12,720	)


Segment (loss) profit	$	(1,811	)	$	1,129		$	(3,775	)	$	(4,457	)


2011	RECYCLING			WASTE SERVICES			OTHER			SEGMENT TOTALS

	(in thousands)
Cash	$	1,116		$	—		$	1,151		$	2,267
Income tax receivable		—			—			3,967			3,967
Accounts receivable, net		16,342			940			(91	)		17,191
Inventories		18,500			44			—			18,544
Net property and equipment		18,909			1,024			6,266			26,199
Goodwill		6,840			—			—			6,840
Net intangibles		5,025			—			—			5,025
Other assets		363			12			562			937


Segment assets	$	67,095		$	2,020		$	11,855		$	80,970


2010	RECYCLING			WASTE SERVICES			OTHER			SEGMENT TOTALS

	(in thousands)
Recycling revenues	$	334,667		$	—		$	—		$	334,667
Equipment sales, service and leasing revenues		—			2,126			—			2,126
Management fees		—			6,212			—			6,212
Cost of goods sold		(309,481	)		(6,239	)		—			(315,720	)
Selling, general, and administrative expenses		(7,469	)		(1,016	)		(5,252	)		(13,737	)


Segment profit (loss)	$	17,717		$	1,083		$	(5,252	)	$	13,548


2010	RECYCLING			WASTE SERVICES			OTHER			SEGMENT TOTALS

	(in thousands)
Cash	$	1,258		$	—		$	1,210		$	2,468
Accounts receivable, net		24,933			1,140			1,376			27,449
Inventories		34,222			89			—			34,311
Net property and equipment		25,799			1,228			527			27,554
Goodwill		6,840			—			—			6,840
Net intangibles		5,775			—			—			5,775
Other assets		574			86			1,105			1,765


Segment assets	$	99,401		$	2,543		$	4,218		$	106,162


2009	RECYCLING			WASTE SERVICES			OTHER			SEGMENT TOTALS

	(in thousands)
Recycling revenues	$	171,841		$	—		$	—		$	171,841
Equipment sales, service and leasing revenues		—			2,116			—			2,116
Management fees		—			7,095			—			7,095
Cost of goods sold		(154,482	)		(6,277	)		—			(160,759	)
Inventory adjustment for lower of cost or market		—			—			—			—
Selling, general, and administrative expenses		(6,280	)		(1,333	)		(2,875	)		(10,488	)


Segment (loss) profit	$	11,079		$	1,601		$	(2,875	)	$	9,805


2009	RECYCLING			WASTE SERVICES			OTHER			SEGMENT TOTALS

	(in thousands)
Cash	$	531		$	—		$	182		$	713
Accounts receivable, net		7,520			981			11			8,512
Inventories		26,315			112			—			26,427
Net property and equipment		23,577			1,341			2,077			26,995
Goodwill		2,567			—			—			2,567
Net intangibles		—			—			—			—
Other assets		586			22			852			1,460


Segment assets	$	61,096		$	2,456		$	3,122		$	66,674

NOTE 13 – PURCHASE OF INVENTORY, FIXED ASSETS, AND INTANGIBLE ASSETS OF VENTURE METALS, LLC

On January 13, 2009 we entered into an inventory purchase agreement with Venture Metals, LLC (“Venture”), a metal recycler focused on stainless steel and high temperature alloys, and its members, Steve Jones, Jeff Valentine and Carlos Corona, under which we agreed to pay to Venture $8.8 million for inventory comprised of stainless steel and high temperature alloys, which we verified as to weight. Mr. Corona is our employee. We funded the purchase of the inventory through our line of credit with Branch Banking & Trust (“BB&T”). We subsequently paid an additional $262.3 thousand for inventory after the final verification of weight. This initial transaction was part of an overall agreement to acquire the operations of Venture.

Under the agreement, we had the right to retain the use of the property located at 3409 Camp Ground Road, Louisville, Kentucky, the site of the Venture business that Venture leases from Luca Investments, LLC (“Luca”), an affiliate of Venture, owned 50.0% each by Messrs. Jones and Valentine. We had the right to use the facilities located on those premises for a period not to exceed two years from the date of the

agreement for a monthly rental of $15.0 thousand.

On April 13, 2009, we exercised our option to purchase fixed assets under an installment purchase agreement with Venture, whereby Venture sold all of its fixed assets, located at 3409 Camp Ground Road, Louisville, Kentucky, to us by virtue of an installment purchase agreement effective February 11, 2009. Steve Jones, Jeff Valentine and Carlos Corona were the sole members of Venture. Under the notice of exercise of option to purchase fixed assets we agreed to purchase the fixed assets on April 17, 2009 for the purchase price of $1.5 million less the aggregate amount of all rent we paid to Venture under the previous agreement. The installment payment we owed to Venture was $15.0 thousand per month commencing March 1, 2009 with a pro-rata amount paid for the period from February 11, 2009 through February 28, 2009. A further description of the installment purchase agreement and related transactions is contained in Items 1.01 and 2.01 of Form 8-K for the event dated February 11, 2009, as filed on February 18, 2009, with the Securities and Exchange Commission by us.

At the time of the consummation of the option to purchase fixed assets, the installment purchase agreement terminated. In connection with the exercise of the option to purchase, Venture had to satisfy outstanding obligations with respect to the fixed assets owed to a number of creditors. The fixed assets include equipment such as cranes, loaders, scales, forklifts, computers, including computer software, furniture and certain leasehold improvements to the property at 3409 Camp Ground Road, Louisville, Kentucky.

We completed the acquisition of the real property at 3409 Camp Ground Road, Louisville, Kentucky, from Luca on April 2, 2009. Under the agreement, we purchased the property and improvements thereon consisting of 5.67 acres with a 7,875 square foot building located thereon. We paid $2.1 million for the property, comprised of $1.3 million in cash and 300,000 shares of ISA common stock priced at the per share NASDAQ last sale price of $2.67, as quoted on NASDAQ at 10:30 a.m. (EDT) on April 2, 2009. We determined the purchase price for the real estate based on internal analyses as to the value of the property. BB&T provided credit to us under our $10.0 million line of credit with BB&T funding the cash portion of the purchase price.

Although the above transactions were not completed simultaneously due to timing constraints relating to verification of inventory, fixed asset appraisals, property appraisals, and funding considerations, management’s intention from the initial transaction was to purchase the operations of Venture. As the above transactions were completed within the one-year measurement period according to ASC Topic 805, we have treated these combined transactions as an acquisition (the “2009 Acquisition”) and have followed FASB’s authoritative guidance on business combinations for reporting purposes. Accordingly, the results of operations of the acquired business have been included in the consolidated statement of income since January 2009. With this acquisition, we did not obtain control of Venture, as we did not have any financial interest, variable financial interest, voting interest or shares in Venture, not did we have or obtain a non-controlling interest in Venture.

The initial purchase price was allocated based on the information available to management and Venture at the time. Management engaged a third party appraiser to determine the fair value of the property and equipment acquired. Subsequent to the completion of this process, we recorded an adjustment to the purchase price allocation amounting to $2.0 million. Goodwill resulting from this purchase relates to the name recognition of Venture Metals, LLC in the industry as well as synergies expected from the business combination. Any adjustments made to provisional amounts are based on new information obtained about the facts and circumstances that existed as of the acquisition date.

The following table summarizes the purchase price allocation in thousands:


	Original			Adjustment			Final

Inventory	$	9,109		$	—		$	9,109
Equipment, furniture and fixtures		1,499			(474	)		1,025
Property and improvement		2,067			(1,533	)		534
Goodwill		—			2,007			2,007


		12,675		$	—			12,675
Less: Amount paid with stock		(800	)		—			(800	)


Cash consideration	$	11,875		$	—		$	11,875

On March 26, 2010, we entered into an agreement dated July 1, 2010, subject to shareholder approval of certain issuances of shares of our common stock. After shareholder approval of the issuance of 300,000 shares of our common stock, on July 1, 2010, we entered into an asset purchase agreement and a non-compete agreement with Venture. Pursuant to the asset purchase agreement dated July 1, 2010, in consideration for the transfer of the Venture Metals, LLC name and entry into the Non-Compete Agreement, we delivered to Venture 300,000 shares of our common stock based on a price of $10.41 per share (the “Purchase Price”) based on the stock price on July 1, 2010. Management determined that the purchase of these intangibles would protect our market position and customer and supplier relationships and also constitutes a separate business acquisition under ASC Topic 805 (the “2010 Acquisition”).

The purchase price was negotiated between us and Steve Jones, former co-owner of Venture. After purchasing Mr. Corona’s share of Venture on January 1, 2010, Venture was owned by Steve Jones and Jeff Valentine, both of whom were our employees at the time. An outside financial consultant also assessed the transaction to provide an opinion of the fair value of the transaction, which led to a supplemental acquisition dated July 1, 2010, as described below.

The material terms of the Non-Compete Agreement include that (i) Venture, or any entity that Venture may become, operating under any name agrees that for a period of five (5) years from the date of the Agreement (the “Non-Competition Period”), Venture will not directly or indirectly (a) engage in any business which is the same or substantially the same as any business of the Company (the “Restricted Business”), or (b) have any interest in any other business venture, whether as a debt or equity holder, member, manager, partner, agent, security holder, consultant or otherwise, that directly or indirectly is engaged in the Restricted Business, within one hundred (100) direct miles of any geographic area in which the Company, its affiliates or any of their respective subsidiaries, engages in the business operations as of the date hereof (the “Restricted Area”); (ii) during the Non-Competition Period, Venture will not, directly or indirectly, (a) solicit for employment or employ (or attempt to solicit for employment or employ), for Venture or on behalf of any other person (other than the Company or any of its respective subsidiaries), or (b) otherwise encourage any such employee to leave his or her employment with the Company, its affiliates or any of their respective subsidiaries; (iii) during the Non-Competition Period, Venture shall not, directly or indirectly, (a) solicit, call on, or transact or engage in the Restricted Business with (or attempt to do any of the foregoing with respect to) any customer (e.g.: North American Stainless), distributor, vendor, supplier or agent with whom the Company, its affiliates or any of their respective subsidiaries shall have dealt, or that the Company, its affiliates or any of their respective subsidiaries shall have actively sought to deal, for or on behalf of Venture or any other person (other than the Company, its affiliates or any of their respective subsidiaries) in connection with the Restricted Business or (b) encourage any such customer, distributor, vendor, supplier or agent to cease, in whole or in part, its business relationship with the Company, its affiliates or any of their respective subsidiaries; and (iv) if

Venture breaches the terms of this Agreement, the Company will be entitled to the following remedies: (a) damages from Venture; (b) to offset against any and all amounts owing to Venture under the Asset Purchase Agreement any and all amounts which the Company claims under the Agreement; (c) in addition to its right to damages and any other rights it may have to obtain injunctive or other equitable relief to restrain any breach or threatened breach or otherwise to specifically enforce the provisions of this Agreement, it being agreed that money damages alone would be inadequate to compensate the Company and would be an inadequate remedy for such breach; and (d) the rights and remedies of the parties to the Agreement are cumulative and not alternative.

On June 16, 2010, the Company and Venture agreed to a supplemental acquisition, the 2010 Acquisition, dated July 1, 2010. Pursuant to this agreement, on April 12, 2010, the Company paid Venture $1.3 million for the benefit of Messrs. Jones and Valentine using the line of credit. This amount represents an annual performance bonus in cash equal to seven and one-half percent (7.5%) for both Mr. Jones and Mr. Valentine of the amount determined, for the 2009 fiscal year of the Company, by (i) the Segment profit of the 2009 Acquisition (the “Alloys Segment Profit”) minus (ii) the product of (a) the selling, general and administrative expenses under the Other category, times (b) the percentage determined by dividing the Alloys Segment Profit by the Segment profit under the Segment Totals category, all as reflected in the Segment Information note of the Notes to Consolidated Financial Statements as contained in the 2009 Annual Report on Form 10-K. The amount was accrued in 2009 by expensing the calculated amount monthly throughout 2009 to bonus expense in the Recycling segment’s SG&A expenses. On July 1, 2010, the Company issued to Venture 300,000 shares of Common Stock, in exchange for Venture’s customer list, the Venture name, Venture’s execution of a non-compete agreement, and Venture’s agreement to cause Mr. Jones and Mr. Valentine to provide the company with non-compete agreements. Based on an independent appraisal, the Company agreed to deliver up to an additional 750,000 shares of ISA Common Stock in accordance with the following:

(a) Venture would receive up to ninety thousand (90,000) shares of ISA common stock per annum commencing in 2011 for calendar year 2010, and thereafter in 2012, 2013, 2014, and 2015 for calendar years 2011, 2012, 2013, and 2014, respectively, resulting in a maximum of four hundred and fifty thousand (450,000) shares of ISA common stock over such period (but in no event greater than 90,000 shares in any one calendar year) based on satisfaction of certain RONA criteria. Such consideration would be payable in the form of ISA common stock in one delivery of a stock certificate, as soon as practicable following December 31, 2014 subject to applicable withholding and other taxes and other required deductions;

(b) Venture would be entitled to receive additional consideration for the purchase of assets up to three hundred thousand (300,000) shares of ISA common stock based on satisfaction of certain 5 year (2010-2014) average RONA criteria. Such consideration would be payable in the form of Company common stock in one delivery of a stock certificate, as soon as practicable following December 31, 2014 subject to applicable withholding and other taxes and other required deductions.

The Company obtained a valuation of the intangibles from an outside source. Of the valuation methodologies considered for the valuation of the intangible assets purchased from Venture, the income approach valuation method was used. In this approach, discounted cash flow analysis measures the value of a company by the present value of its estimated future economic benefits. These benefits can include earnings, cost savings, tax deductions, and proceeds from disposition. Value indications are developed by discounting expected cash flows to their present value at a rate of return that incorporates the risk-free rate for the use of funds, the expected rate of inflation and risks associated with the particular investment. The material assumptions used in the valuation include a discount rate range, a long-term growth rate, a

working capital rate, and a terminal growth rate range. The valuation also includes income projections and capital expenditure forecasts as provided by management. These assumptions and estimates were based on information available at the time the valuation was performed. These assumptions and estimates bear the risk of change as future performance, future economic conditions, and continued major customer relationships cannot be predicted or guaranteed.

Based on preliminary estimates and the share price as of July 1, 2010 of $10.41 per share, we recorded additional goodwill of $4.3 million, decreased the value of the intangible asset by $630.0 thousand, and increased fourth quarter amortization expense related to the intangible assets by $98.7 thousand. We also recorded a commitment of $7.3 million to paid in capital representing the fair value of the contingent consideration associated with the purchase of the intangibles as of December 31, 2010. This commitment value was determined based on management’s estimate that the probability of achieving the RONA criteria was approximately 94%. The maximum value of the contingent shares is $7.8 million based on the $10.41 per share value as of the acquisition date. No changes were made to recorded amounts for goodwill or the other amortized intangible items based on the completion of the valuation in the second quarter of 2011.

On February 24, 2011, we issued 45,000 shares of our common stock each to Steve Jones and Jeff Valentine for the satisfaction of certain RONA criteria for the year ending December 31, 2010. We decreased the contingent consideration value to $6.4 million.

The Company also obtained a valuation from an outside source to verify our goodwill balance as of December 31, 2011. Of the valuation methodologies considered for the valuation of the goodwill, the income approach valuation method was used. In this approach, discounted cash flow analysis measures the value of a company by the present value of its estimated future economic benefits. These benefits can include earnings, cost savings, tax deductions, and proceeds from disposition. Value indications are developed by discounting expected cash flows to their present value at a rate of return that incorporates the risk-free rate for the use of funds, the expected rate of inflation and risks associated with the particular investment. The material assumptions used in the valuation include a discount rate range, a long-term growth rate, a working capital rate, and a terminal growth rate range. The valuation also includes income projections and capital expenditure forecasts as provided by management. These assumptions and estimates were based on information available at the time the valuation was performed. These assumptions and estimates bear the risk of change as future performance, future economic conditions, and continued major customer relationships cannot be predicted or guaranteed. Based on this valuation, no impairment value was recorded to goodwill.

NOTE 14 - LONG TERM INCENTIVE PLAN

At our June 16, 2009 annual shareholders meeting, shareholders approved ratification of a long term incentive plan and approved the issuance of additional common shares of our stock. At our June 10, 2010 annual shareholders meeting, the shareholders approved the reservation of 1,200,000 additional shares of our common stock under the plan. The plan makes available up to 2,400,000 shares of our common stock for performance-based awards under the plan. We may grant any of these types of awards: non-qualified and incentive stock options; stock appreciation rights; and other stock awards including stock units, restricted stock units, performance shares, performance units, and restricted stock. The performance goals that we may use for such awards will be based on any one or more of the following performance measures: cash flow; earnings; earnings per share; market value added or economic value added; profits; return on assets; return on equity; return on investment; revenues; stock price; or total shareholder return.

The plan is administered by a committee selected by the Board, initially our Compensation Committee, and consisting solely of two or more outside members of the Board. The Committee may grant one or more awards to our employees, including our officers, our directors and consultants, and will determine the specific employees who will receive awards under the plan and the type and amount of any such awards. A participant who receives shares of stock awarded under the plan must hold those shares for six months before the participant may dispose of such shares. The Committee may settle an award under the plan in cash rather than stock.

For performance-based stock awards granted under this plan, we have assumed that the performance targets for awards granted in a specific year will be achieved. We have assumed that performance targets for future years will not be achieved. Based on these assumptions, we use the closing per share stock price on the date the contract is signed to calculate award values for recording purposes. These calculated amounts reflect the aggregate grant date fair value of the stock awards computed in accordance with ASC Topic 718.

As of July 1, 2009, we awarded options to purchase 30,000 shares of our stock each to our three independent directors for a total of 90,000 shares at a per share exercise price of $4.23. We recorded expense related to these stock options of $95,071 in 2009. See Note 1 – “Stock Option Plans” of these Notes to Consolidated Financial Statements for additional information on this stock option plan.

On January 6, 2010, the Board of Directors granted non-performance based stock awards of 25,500 shares to management at $6.39 per share. On January 11, 2010, we issued 18,000 shares and on February 11, 2010, we issued the remaining 7,500 shares of this grant. On June 8, 2010, we issued 30,000 thousand shares of our stock granted on April 14, 2009 to management at a grant date fair value of $2.53 per share. On November 15, 2010, we issued 5,000 shares of our stock to management at $10.34 per share. In January 2011, we issued 60,000 shares of our stock granted on April 1, 2010 to management at a grant date fair value of $11.93 per share and 600 shares of our stock to consultants at $12.28 per share.

NOTE 15 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)


2011	1st		2nd		3rd			4th			Year

	(in thousands, except per share information)

Revenue	$	106,187	$	64,963	$	55,766		$	49,954		$	276,870
Gross profit (loss)		7,835		4,182		(1,030	)		717		$	11,704
Inventory write-down		—		—		(3,441	)		—		$	(3,441	)
Income (loss) before other income (expense)		4,055		1,610		(7,165	)		(2,957	)	$	(4,457	)
Net income		2,167		313		(4,536	)		(1,825	)	$	(3,881	)
Basic earnings (loss) per share		0.31		0.05		(0.67	)		(0.26	)		(0.56	)
Diluted earnings (loss) per share		0.31		0.05		(0.67	)		(0.26	)		(0.56	)

After a strong first quarter in 2011, sales to our main stainless steel customer began to decline as compared to 2010 due to a decline in demand for stainless steel. Additionally, reduced metal prices caused us to adjust our inventory levels by $3.4 million to lower of cost or market at the end of the third quarter.


2010	1st		2nd		3rd		4th		Year

	(in thousands, except per share information)

Revenue	$	74,169	$	92,815	$	76,550	$	99,471	$	343,005
Gross profit		6,283		7,754		7,369		5,879		27,285
Income before other income (expense)		3,082		4,189		3,485		2,792		13,548
Net income		1,763		2,347		1,923		2,020		8,053
Basic earnings per share		0.27		0.36		0.28		0.30		1.22
Diluted earnings per share		0.27		0.36		0.28		0.29		1.21


2009	1st		2nd		3rd		4th		Year

	(in thousands, except per share information)

Revenue	$	24,250	$	39,124	$	79,970	$	37,708	$	181,052
Gross profit		3,985		4,151		6,514		5,643		20,293
Income before other income (expense)		1,275		1,711		3,907		2,912		9,805
Net income		654		922		2,161		1,548		5,285
Basic earnings per share		0.12		0.17		0.37		0.24		0.91
Diluted earnings per share		0.12		0.17		0.37		0.24		0.91

Shredder production began in the third quarter of 2009, significantly increasing revenues in the first and second quarters of 2010 as compared to the first and second quarters of 2009. Historically, fourth quarter revenue has decreased; however, in the fourth quarter of 2010, a major customer increased their stainless steel orders by $57.4 million as compared to the fourth quarter of 2009.

Depreciation expense that was taken in the first three quarters of 2009 in the amount of $68.4 thousand related to the acquisition of the Venture Metals, LLC was adjusted as a result of finalizing the purchase price allocation resulting in a reduction of depreciation expense in the fourth quarter of 2009.

SUPPLEMENTARY INFORMATION

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 2011, 2010 and 2009


Description	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Deductions *			Balance at End of Period


Allowance for doubtful accounts 2011 (deducted from accounts receivable)	$	100,000	$	—	$	—		$	100,000


Allowance for doubtful accounts 2010 (deducted from accounts receivable)	$	100,000	$	—	$	—		$	100,000


Allowance for doubtful accounts 2009 (deducted from accounts receivable)	$	490,000	$	—	$	(390,000	)	$	100,000


Accrual for legal settlements for 2011	$	—	$	—	$	—		$	—


Accrual for legal settlements for 2010	$	—	$	—	$	—		$	—


Accrual for legal settlements for 2009	$	990,000	$	—	$	990,000		$	—

* Uncollected amounts written off, net of recoveries

EX-3.2 2 c68719_ex3-2.htm

Exhibit 3.2


Articles of Amendment
to
Articles of Incorporation
of
Industrial Services of America, Inc.
	(Name of
Corporation as currently filed with the Florida Dept. of State)
175517
	(Document Number
of Corporation (if known)

Pursuant to the provisions of section 607.1006, Florida Statutes, this Florida Profit Corporation adopts the following amendment(s) to its Articles of Incorporation:

A. If amending name, enter the new name of the corporation:

_____________________________________________ ___________________________________________________________________ The new
name must be distinguishable and contain the word “corporation,” “company,” or “incorporated” or the abbreviation “Corp.,” “Inc.,” or Co.,” or the designation “Corp,” “Inc,” or “Co”. A professional corporation name must contain the word “chartered,” “professional association,” or the abbreviation “PA.”


B.	Enter new principal office address, if applicable:

(Principal office address MUST BE A STREET ADDRESS)



C.	Enter new mailing address, if applicable:

	(Mailing address MAY BE A POST OFFICE BOX)


D.	If amending the registered agent and/or registered office address in Florida, enter the name of the new registered agent and/or the new registered office address:


	Name of New Registered Agent



	(Florida street address)

	New Registered Office Address: ______________________________________, Florida_______________ (City) (Zip Code)

New Registered Agent’s Signature, if changing Registered Agent:

I hereby accept the appointment as registered agent. I am familiar with and accept the obligations of the position.

                                                        ___________________________________________Signature of New Registered Agent, if

                                                                                    changing

Page 1 of 4

If amending the Officers and/or Directors, enter the title and name of each officer/director being removed and title, name, and address of each Officer and/or Director being added:
(Attach additional sheets, if necessary)

Please note the officer/director title by the first letter of the office title:
P = President; V= Vice President; T= Treasurer; S= Secretary; D= Director; TR= Trustee; C = Chairman or Clerk; CEO = Chief Executive Officer; CFO = Chief Financial Officer. If an officer/director holds more than one title, list the first letter of each office held. President, Treasurer, Director would be PTD.

Changes should be noted in the following manner. Currently John Doe is listed as the PST and Mike Jones is listed as the V. There is a change, Mike Jones leaves the corporation, Sally Smith is named the V and S. These should be noted as John Doe, PT as a Change, Mike Jones, Vas Remove, and Sally Smith, SV as an Add,


Example:
X Change	PT	John Doe

X Remove	V	Mike Jones

X Add	SV	Sally Smith


Type of Action		Title	Name	Address
(Check One)

1)	Change

	Add

	Remove


2)	Change

	Add

	Remove


3)	Change

	Add

	Remove


4)	Change

	Add

	Remove


5)	Change

	Add

	Remove


6)	Change

	Add

	Remove

Page 2 of 4


E.	If amending or adding additional Articles, enter change(s) here:
	(attach additional sheets, if necessary). (Be specific)

Article III is amended to change the par value of the shares of Common Voting Stock. The first grammatical sentence of Article III shall be deleted and replaced as follows:

ARTICLE III

The maximum number of share of Common Voting Stock that this Corporation is authorized to have outstanding at any one time is ten million (10,000,000) shares of the par value of $0.0033 per share.


F.	If an amendment provides for an exchange, reclassification, or cancellation of issued shares. provisions for implementing the amendment if not contained in the amendment itself:
	(if not applicable, indicate N/A)

Page 3 of 4


The date of each amendment(s) adoption:		February 28, 2012


Effective date if applicable:

	(no more than 90 days after amendment file date)

Adoption of Amendment(s)		(CHECK ONE)


q	The amendment(s) was/were adopted by the shareholders. The number of votes cast for the amendment(s) by the shareholders was/were sufficient for approval.

o	The amendment(s) was/were approved by the shareholders through voting groups. The following statement must be separately provided for each voting group entitled to vote separately on the amendment(s):

		“The number of votes cast for the amendment(s) was/were sufficient for approval

		by _____________________________________________________________ .”
		(voting group)

n	The amendment(s) was/were adopted by the board of directors without shareholder action and shareholder action was not required.

q	The amendment(s) was/were adopted by the incorporators without shareholder action and shareholder action was not required.


Dated	2/29/2012


Signature		/s/ Robert D. Coleman

		(By a director, president or other officer — if directors or officers have not been selected, by an incorporator — if in the hands of a receiver, trustee, or other court appointed fiduciary by that fiduciary)


	Robert D. Coleman

	(Typed or printed name of person signing)

		Chief Financial Officer

		(Title of person signing)

Page 4 of 4

EX-3.3 3 c68719_ex3-3.htm

Exhibit 3.3

AMENDED BY-LAWS OF

INDUSTRIAL SERVICES OF AMERICA, INC.

(A Florida Corporation)

ARTICLE I

Offices

SECTION 1. HOME OFFICE. The home office shall be 2690 N.E. 191st Street, Miami, Florida.

SECTION 2. PRINCIPAL OFFICE. The principal office shall be 2690 N.E. 191st Street, Miami, Florida.

SECTION 3. OTHER OFFICES. The corporation may also have an office or offices at such other place or places within or without the State of Florida as the Board of Directors may, from time to time, designate or the business of the Corporation may require.

ARTICLE II

Stockholders’ Meetings

SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders of the corporation, shall be held at the office of the Corporation in the State of Florida, or at such other place within or without the State of Florida as may be determined by the Board of Directors and as shall be designated in the notice of said meeting, on the Third Tuesday in the month of May of each year (or if said day be a legal holiday) the on the next succeeding day not a legal holiday), at 10:00 o’clock in the forenoon, for the purpose of electing directors for the ensuing year, and for the transaction of such other business as may be properly brought before the meeting, unless the Board of Directors previously shall have fixed a different date for the meeting.

SECTION 2. SPECIAL MEETING. Special meeting of stockholders, other than those regulated by statute, may be called at any time by a majority of directors. Notice of such meeting stating the purpose for which it is called shall be served personally or by mail, not less than ten (10) days before the date set for such meeting. If mailed, it shall be directed to a stockholder at his address as it appears on the stock book; but at any meeting at which all stockholders shall be present, or of which stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. The Board of Directors shall also, in like manner, call a special meeting of stockholders whenever so requested in writing by stockholders representing not less than a majority of the capital

stock of the company. No business other than that specified in the call for the meeting, shall be transacted at any meeting of the stockholders.

SECTION 3. NOTICE AND PURPOSE OF MEETINGS. Notice of the purpose or purposes and of the time and place within or without the State of Florida of every meeting of stockholders, annual or special, shall be given in accordance with the Laws of the State of Florida, and shall be in writing and signed by the President, Vice-President or the Secretary, and a copy thereof shall be served either personally or by mail or by any other lawful means, not less than ten (10) days before the meeting, upon each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be directed to each stockholder at his address, as it appears on the stock book; unless he shall have filed with the Secretary of the corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed or transmitted to the address designated in such request. Except as otherwise expressly provided by statute, no publication of any notice of a meeting of stockholders shall be required to be given to any stockholder who shall, in person or by attorney thereunto authorized, waive such notice in writing or by telegraph, cable, radio or wireless either before or after such meeting. Except where otherwise required by law, notice of any adjourned meeting of the stockholders of the corporation shall not be required to be given. However, stockholders holding one-half of the outstanding stock may execute a written waiver of any and all notices, and when such waiver is had, the proceedings of such meeting shall be as valid and binding as though the meeting were legally called.

SECTION 4. QUORUM. A quorum at all meetings of stockholders shall consist of the holders of record of a majority of the shares of the Common Stock of the corporation, issued and outstanding, entitled to vote at the meeting, present in person or by proxy, except as otherwise provided by law or the Certificate of Incorporation.

In the absence of a quorum at any meeting or any adjournment thereof, a majority of the Common stockholders present in person or by proxy and entitled to vote may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called.

SECTION 5. ORGANIZATION. Meetings of the stockholders shall be presided over by the President, or if he is not present, by the Secretary, or if neither the President nor the Secretary is present, by a Vice-President or by a Chairman to be chosen by a majority of the common stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the corporation, or should he be absent or serve as Chairman, a Vice-President or an Assistant Secretary, shall act as Secretary of every meeting, but if neither the Vice-President nor an Assistant Secretary is present, the Chairman shall choose any person present to act as Secretary of the meeting.

At the annual meeting of stockholders the order of business, subject to change directed by the Chairman or voted by the stockholders, shall be as follows:


	1.	Calling Meeting to Order
	2.	Proof of Notice of Meeting
	3.	Reading of Minutes of last previous annual meeting.
	4.	Reports of Officers
	5.	Reports of committees
	6.	Election of directors


	7.	Miscellaneous business

SECTION 6. VOTING. Except as otherwise provided in the By-Laws, the Certificate of Incorporation, or by the Laws of the State of Florida, at every meeting of the stockholders, each stockholder of the corporation entitled to vote at such meeting shall have one vote in person or by proxy for each share of stock held by him and registered in his name on the books of the corporation at the time of such meeting. Any vote on stock of the corporation may be given by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized and delivered to the Secretary of the meeting; provided, however, that no proxy shall be noted on after three (3) years from its date unless said proxy provides for a longer period. Except as otherwise required by statute, by the Certificate of Incorporation or these By-Laws, elections of Directors and all other elections and voting with regard to any corporate matters coming before any meeting of the stockholders shall be decided by vote of a plurality in interest of the stockholders of the corporation present in person or by proxy at such meeting, and entitled to vote thereat, a quorum being present.

SECTION 7. LIST OF STOCKHOLDERS. A complete list of the stockholders entitled to vote at the ensuing election, and the number of voting shares held by each shall be made available at the meeting by the Secretary, or other officer of the corporation and such list may be prepared by the company or the Transfer Agent and shall, during the whole time of said election, be open to the examination of any inspectors of election.

SECTION 8. INSPECTORS OF ELECTION. At all elections of directors, or in any other case in which inspectors may act, two inspectors of election shall be appointed by the chairman of the meeting, except as otherwise provided by the law. The inspectors of election shall take and subscribe on oath faithfully to execute the duties of inspectors at such meeting with strict impartiality, and according to the best of their ability, and shall take charge of the polls and after the vote shall have been taken, shall make certificate of the result thereof, but no director or candidate for the office of directors shall be appointed as such inspector. If there be a failure to appoint inspectors or if any inspector appointed be absent or refuse to act, or if his office becomes vacant, and should the Chairman not appoint said inspectors, the stockholders present at the meeting, by a per capita vote, may choose temporary inspectors of the number required.

ARTICLE III

DIRECTORS

SECTION 1. POWERS, NUMBER, QUALIFICATIONS, TERMS, QUORUM AND VACANCIES. The property, affairs and business of the corporation shall be managed by its Board of Directors, which shall consist of not less than three (3) nor more than (9) persons, as hereinafter provided. Except as hereinafter provided, directors shall be elected at the annual meeting of the stockholders and each director shall be elected to serve for one (1) year and until his successor shall be elected and shall qualify. A majority of directors shall have power from time to time, and at any time, when the stockholders as such are not assembled in a meeting, regular or special, to

increase or decrease their own number subject to the limitation in the first sentence of this Section 1. If the number of directors be increased the additional directors may be elected by a majority of the directors in office at the time of the increase to serve until the next annual meeting of the stockholders and until such director’s successor is elected and qualified.

Directors need not be stockholders.

Half of the members of the Board of Directors then acting, or a majority of these be an odd number, acting at a meeting duly assembled, shall constitute a quorum for the transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting, without further notice, from time to time until a quorum shall have been obtained.

In case one or more vacancies shall occur in the Board of Directors by reason of death, resignation or otherwise, the remaining directors, although less than a quorum, may, by a majority vote, elect a successor or successors for the unexpired term or terms.

SECTION 2. MEETINGS. Meetings of the Board of Directors shall be held at such place within or outside the State of Florida as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of the meeting, or as provided for by the Certificate of Incorporation. Regular meetings of the Board of Directors shall be held at such times as may from time to time be fixed by resolution of the Board of Directors. Special meetings may be held at any time upon the call of the President or any Vice-President or the Secretary or any two Directors by oral, telegraphic or written notice duly served on or sent or mailed to each director not less than two (2) days before such meeting. A meeting of the Board of Directors may be held without notice immediately after the annual meeting of stockholders. Notice need not be given of regular meetings of the Board of Directors. Meetings may be held at any time without notice if all the directors are present or if at any time before or after the meeting those not present waive notice of the meeting in writing.

The Chairman of the Board shall preside at such meeting, but the following officers may preside in his absence in the following order only if they are directors. The President, the Secretary, the Vice-President.

SECTION 3. COMMITTEES. The Board of Directors may, in its discretion, by the affirmative vote of a majority of the whole Board of Directors, appoint committees which shall have and may exercise such powers as shall be conferred or authorized by the resolutions appointing them. A majority of any such committee, if the committee be composed of more than two (2)members, may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board of Directors, shall have power at any time to fill vacancies in, to change the membership of, or to discharge any such committee.

SECTION 4. EXECUTIVE COMMITTEE. The Board of Directors may form an Executive Committee, to consist of two (2) or more directors elected by resolution passed by a majority of the entire Board, and to which the Board of Directors may direct or delegate from time to time all or part of the duties and powers of the Board of Directors with the exception of those duties and powers specifically prohibited by the Laws of the State of Florida, said Committee when so designated and elected shall have the

authority to act in the place and stead of the Board of Directors, and may meet at any stated time within or without the State of Florida, on notice to all of the members of the Executive Committee by any of their own number. Should any of the following officers be on the Executive Committee a chairman shall be chosen from among them but in the order stated: (1) Chairman of the Board of Directors, (2) President, (3)Secretary, (4) Vice-President, (5) Treasurer. During the intervals between meetings of the Board, such Committee shall advise with and aid the officers of the corporation in all matters concerning its interest and management of its business, and generally perform such duties and powers as may be directed or delegated by the Board of Directors from time to time. Membership of the Committee may be increased by, and vacancies therein may be filled by, the Board of Directors.

SECTION 5. DIVIDENDS. Subject always to the provisions and requirements of the Law, the Certificate of Incorporation and The Amendment to the Certificate of Incorporation, the Board of Directors shall have full power to determine whether any, and if any, what part of any, funds legally available for the payment of dividends shall be declared in dividends and paid to stockholders; the division of the whole or any part of such funds of the corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise; and the Board of Directors may fix a sum which may be set aside or reserved over and above the capital paid in to the corporation as working capital for the corporation or as a reserve for any proper purpose, and from time to time may increase, diminish, and vary the same in its absolute judgment and direction.

The Board of Directors shall, prior to the declaration of any dividend, fix a date no more than sixty (60) nor less than ten (10) days prior to the payment date on which stockholders of record on such fixed date shall be entitled to receive such dividend thereafter payable, notwithstanding such date may precede determination of any period, provided for by the Certificate of Incorporation, for which a dividend may be payable.

SECTION 6. REMOVAL OF DIRECTORS. At any special meeting of the directors, duly called as provided in these By-laws, any director or directors may by the affirmative vote of a majority of all of the directors be removed from office, either with or without cause, and his successor or their successors may be elected at such meeting.

SECTION 7. INDEMNIFICATION.

ISA shall indemnify any person who was or is a party to any proceeding (other than an action by, or in the right of, ISA), by reason of the fact that he or she is or was a director, officer, employee, or agent of ISA or is or was serving at the request of ISA as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against liability incurred in connection with such proceeding, including any appear thereof, if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interest of ISA and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any proceeding by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner


	which he or she reasonably believed to be in, or not opposed to, the best interests of ISA or, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

2.	ISA shall indemnify any person, who was or is a party to any proceeding by or in the right of ISA to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee, or agent of ISA or is or was serving at the request of ISA as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses and amounts paid in settlement not exceeding, in the judgment of the board of directors, the estimated expense of litigating the proceeding to conclusion, actually and reasonably incurred in connection with the defense or settlement of such proceeding, including any appeal thereof. Such indemnification shall be authorized if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of ISA, except that no indemnification shall be made under this subsection in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable unless, and only to the extent that, the court in which such proceeding was brought, or any other court of competent jurisdiction, shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expense which such court shall deem proper.

3.	To the extent that a director, officer, employee, or agent of ISA has been successful on the merits or otherwise in defense of any proceeding referred to in subsection (1) or subsection (2), or in defense of any claim, issue, or matter therein, he or she shall be indemnified against expenses actually and reasonably incurred by him or her in connection therewith.

4.	Any indemnification under subsection (1) or subsection (2), unless pursuant to a determination by a court, shall be made by ISA only as authorized in the specific case upon a determination that indemnification of the director, officer, employee, or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in subsection (1) or subsection (2). Such determination shall be made:

	a.	By the board of directors by a majority vote of a quorum consisting of directors who were not parties to such proceeding;

	b.	If such a quorum is not obtainable or, even if obtainable, by majority vote of a committee duly designated by the board of directors (in which directors who are parties may participate) consisting solely of two or more directors not at the time parties to the proceeding;

	c.	By independent legal counsel:

		1.	Selected by the board of directors prescribed in paragraph (a) or the committee prescribed in paragraph (b); or

		2.	If a quorum of the directors cannot be obtained for paragraph


			(a) and the committee cannot be designated under paragraph
			(b), selected by majority vote of the full board of directors (in which directors who are parties may participate); or

	d.	By the shareholders by a majority vote of a quorum consisting of shareholders who were not parties to such proceeding or, if no such quorum is obtainable, by a majority vote of shareholders who were not parties to such proceeding.

5.	Evaluation of the reasonableness of expenses and authorization of indemnification shall be made in the same manner as the determination that indemnification is permissible. However, if the determination of permissibility is made by independent legal counsel, persons specified by paragraph 4(c) shall evaluate the reasonableness of expenses and may authorize indemnification.

6.	Expenses incurred by an officer or director in defending a civil or criminal proceeding may be paid by ISA in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if he or she is ultimately found not to be entitled to indemnification by ISA pursuant to this section. Expenses incurred by other employees and agents may be paid in advance upon such terms or conditions that the board of directors deems appropriate.

7.	The indemnification and advancement of expenses provided pursuant to this section are not exclusive, and ISA may make any other or further indemnification or advancement of expenses of any of its directors, officers, employees, or agents, under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. However, indemnification or advancement of expenses shall not be made to or on behalf of any director, officer, employee, or agent if a judgment or other final adjudication establishes that his or her actions, or omissions to act, were material to the cause of action so adjudicated and constitute:

	a.	A violation of the criminal law, unless the director, officer, employee, or agent had reasonable cause to believe his or her conduct was lawful or had no reasonable cause to believe his or her conduct was unlawful;

	b.	A transaction from which the director, officer, employee, or agent derived an improper personal benefit;

	c.	In the case of a director, a circumstance under which the liability provision of Florida Statute 607.0834 are applicable; or

	d.	Willful misconduct or a conscious disregard for the best interests of ISA in a proceeding by or in the right of ISA to procure a judgment in its favor or in a proceeding by or in the right of a shareholder.

8.	Indemnification and advancement of expenses as provided in this section shall constitute, as unless otherwise provided when authorized or ratified, to a person who has ceased to be a director, officer,


	employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person, unless otherwise provided when authorized or ratified.

9.	Unless ISA’s articles of incorporation provide otherwise, notwithstanding the failure of ISA to provide indemnification, and despite any contrary determination of the board of the shareholders in the specific case, a director, officer, employee, or agent of ISA who is or was a party to a proceeding may apply for indemnification or advancement of expenses, or both, to the court conducting the proceeding, to the circuit court, or to another court of competent jurisdiction. On receipt of an application, the court, after giving any notice that it considers necessary, may order indemnification and advancement of expenses, including expenses incurred in seeking court ordered indemnification ro advancement of expense, if it determines that:

	a.	The director, officer, employee, or agent is entitled to mandatory indemnification under subsection (3), in which case the court shall also order ISA to pay the director reasonable expenses incurred in obtaining court-ordered indemnification or advancement of expenses;

	b.	The director, officer, employee, or agent is entitled to indemnification or advancement of expenses, or both, by virtue of the exercise by ISA of its power pursuant to subsection (7); or

	c.	The director, officer, employee, or agent is fairly and reasonably entitled to indemnification or advancement of expenses, or both, in view of all the relevant circumstances, regardless of whether such person met the standard of conduct set forth in subsection (1), subsection (2), or subsection (7).

10.	For purposes of this section, the term “corporation” includes, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a corporation merger, so that any person who is or was a director, officer, employee, or agent of a constituent corporation, or is or was serving at the request of a constituent corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, is in the same position under this section with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued.

11.	For purposes of this section:

	a.	The term “other enterprises” includes employee benefit plans;

	b.	The term “expenses” includes counsel fees, including those for appeal;


	c.	The term “liability” includes obligations to pay a judgment, settlement, penalty, fine (including any excise tax assessed with respect to any employee benefit plan), and expenses actually and reasonably incurred with respect to a proceeding;

	d.	The term “proceeding” includes any threatened, pending, or completed action, suit, or other type of proceeding, whether civil, criminal, administrative, or investigative and when formal or informal;

	e.	The term “agent’ includes a volunteer;

	f.	The term “serving at the request of ISA” includes any service as a director, officer, employee, or agent of ISA that imposes duties on such persons, including duties relating to an employee benefit plan and its participants or beneficiaries; and

	g.	The term “not opposed to the best interest of ISA” described the actions of a person who acts in good faith and in a manner he or she reasonably believes to be in the best interest of the participants and beneficiaries of an employee benefit plan.

12.	ISA shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of ISA or is or was serving at the request of ISA as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability asserted against the person and incurred by him or her in any such capacity or arising out of his or her status as such, whether or not the corporation would have the power to indemnify the person against such liability under the provisions of this section.

13.	Any repeal or modification of this Section 7 by the Board of Directors or shareholders of ISA shall not adversely affect any right or protection of a Director or officer of ISA under this Section 7 with respect to any act or omission occurring prior to the time of such repeal or modification.

ARTICLE IV

OFFICERS

SECTION 1. NUMBER. The Board of Directors shall meet as soon after the election thereof held in each year and shall from among them elect a Chairman to be known as the Chairman of the Board of Directors, and to preside at Directors’ Meetings and at meetings of the Executive Committee,

and shall, in addition, elect a President, chosen from the members of the Board, a Secretary, and a Treasurer, and from time to time may appoint one or more Vice-Presidents and such Assistant Secretaries, Assistant Treasurers and such other officers, agents and employees as it may deem proper. Any two officers may be held by the same person; more than two officers other than the officers of President and Secretary may be held by the same person.

SECTION 2. TERM AND REMOVAL. The term of office of all officers shall be one (1) year and until their respective successors are elected thereafter and qualify, but any officer may be removed from office, either with or without cause, at any time by the affirmative vote of a majority of the members of the Board of Directors then in office. A vacancy in any office arising from any cause may be filled for the unexpired portion of the term by the Board of Directors.

SECTION 3. POWERS AND DUTIES. The officers of the corporation shall each have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from time to time may be conferred by the Board of Directors. The Vice-President and Vice-Presidents, the Assistant Secretary or Assistant Secretaries and the Assistant Treasurer or Assistant Treasurers shall, in the order of their respective seniorities, in the absence or disability of the President, Secretary or Treasurer respectively, perform the duties of such officer or shall generally assist the President, Secretary or Treasurer, respectively.

ARTICLE V

CERTIFICATION OF STOCK

SECTION 1. FORM AND TRANSFERS. The interest of each stockholder of the corporation shall be evidenced by certificates for shares of stock, certifying the number of shares represented thereby and in such form not inconsistent with the Certificate of Incorporation as the Board of Directors may from time to time prescribe.

Transfers of shares of the capital stock of the corporation shall be made only on the books of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, or with a tranfer clerk or a Transfer Agent, appointed as in Section 4 of this Article provided, and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. The person in whose name shares of stock stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation; provided that whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact, if known to the Secretary of the corporation, shall be so expressed in the entry of transfer. The Board may, from time to time, make such additional rules and regulations as it may deem expedient, not inconsistent with these By-Laws, concerning the issue, transfer, and registration of certificates for shares of the capital stock of the corporation.

Certificates of stock or Warrants shall be signed by the President or a Vice-President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with the seal of the

corporation. Such seal may be a facsimile, engraved or printed. Where any such certificate is signed by a Transfer Agent or a transfer clerk, the signatures of the President, Vice-President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer upon such certificate may be facsimiles, engraved or printed. In case any such officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such before such certificate is issued, it may be issued by the corporation with the same effect as if such officer had not ceased to be such at the time of its issue.

SECTION 2. CLOSING OF TRANSFER BOOKS. The Board of Directors shall have power to close the stock transfer books of the corporation for a period not exceeding sixty (60) days before any stockholders’ meeting or to otherwise provide for a cut-off or fixed date, which shall consist of the last date as of which stockholders of record as of such date will be entitled to any dividends; or on which the consent or dissent of stockholders may be effectively expressed for any purpose without a meeting; or the date fixed for the payment of any dividend or the making of any distribution; or for the delivery of evidences of rights or evidences of interests arising out of any change, conversion, exercise or exchange of capital stock or warrants or option; or as the time as of which stockholders entitled to notice of and to vote at any meeting; or whose consent or dissent is required or may be expressed for any purpose; or entitled to receive any such dividend or distribution; or on which rights or interests shall be determined; and all persons who are holders of record of voting stock at such time and no others shall be entitled to notice of and to vote at such meeting or to express their consent or dissent, as the case may be, and only stockholders of record at the time so fixed shall be entitled to receive such dividend, distributions, rights or interests notwithstanding the fact that the period for which any distribution is made or dividend is payable expires after the closing of said transfer books or the fixing or setting of said cut-off, fixed or last date.

SECTION 3. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES. No certificate for shares of stock in the corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft, and on delivery to the corporation if the Board of Directors shall so require, of a bond of indemnity in such amount (not exceeding twice the value of the share represented by such certificate), upon such terms and secured by such surety as the Board of Directors may, in its discretion, require.

SECTION 4. TRANSFER AGENT. The Board of Directors may appoint one or more transfer clerks or one or more transfer agents and may require all certificates of stock to bear the signature or signatures real or facsimile of any or all of them.

SECTION 5. EXAMINATION OF BOOKS BY STOCKHOLDERS. The Board shall have power to determine, from time to time whether and to what extent and at what times and places and under what conditions and regulations the accounts and books and documents of the corporation, or any of them, shall be open to inspection of the stockholders; and no stockholder shall have any right to inspect any account or book or document of the corporation unless specifically authorized to do so by the Board of Directors and as required by the Laws of the State of Florida.

ARTICLE VI

FISCAL YEAR

The fiscal year of the corporation shall begin on the 1st day of January in each year, and shall end on the 31st day of December next following, unless otherwise determined by the Board of Directors.

ARTICLE VII

CORPORATE SEAL

The corporate seal of the corporation shall consist of two concentric circles, between which shall be the name of the corporation, and in the center shall be inscribed the year of its incorporation, and the words, “Corporate Seal, Florida”.

ARTICLE VIII

AMENDMENTS

The By-Laws of the corporation shall be subject to alteration, amendment, or repeal, and new By-Laws not inconsistent with any provisions of the Certificate of Incorporation or statute, may be made, either by the affirmative vote of the holders of a majority in interest of the stockholders of the corporation present in person or by proxy at any annual or special meeting of the stockholders and entitled to vote thereat, a quorum being present, or by the affirmative vote of a majority of the Board, By-Laws made, altered, or amended by the Board may be altered, amended or repealed by the stockholders at any annual meeting or special meeting thereof.

EX-10.53 4 c68719_ex10-53.htm

Exhibit 10.53

SECOND AMENDMENT TO CONSULTING AGREEMENT

THIS SECOND AMENDMENT TO CONSULTING AGREEMENT (this “Amendment”) is made and entered as of the 23rd day of February, 2012 by and between K&R, LLC, a Kentucky limited liability company and successor in interest to K&R Corporation, a Kentucky corporation (“K&R”), and INDUSTRIAL SERVICES OF AMERICA, INC., a Florida corporation (“ISA”).

— RECITALS —

ISA operates that certain scrap metal and paper recycling business located at 7100 Grade Lane, Louisville, Kentucky 40213, which includes the equipment necessary for the recovery of scrap metal and paper waste and the computer systems and office equipment necessary to operate the businesses.

K&R employs management personnel experienced in the scrap metal and paper recycling industries and the waste disposal industry, and is engaged in the business of planning and consulting with the owners and operators of such businesses.

ISA and K&R entered into a Consulting Agreement dated as of January 2, 1998, as amended on March 26, 2010 (the “Prior Agreement”), whereby ISA engaged K&R as a consultant and retained the services of K&R management personnel to plan and consult regarding ISA’s businesses. The parties now desire to amend the Prior Agreement in certain respects to reflect the decreased value of the consulting services that K&R is providing to ISA.

— AGREEMENT —

In consideration of the preliminary statements and mutual promises and agreements hereinafter set forth, and intending to be legally bound, the parties hereto agree as follows:

Definition of Terms. Terms used herein with their initial letters capitalized and not otherwise defined herein shall have the meaning given to such terms in the Prior Agreement.

Amendments to the Prior Agreement. Section 9 of the Prior Agreement is hereby amended so that as amended such section shall read in its entirety as follows:


	“9. K&R’s Compensation — Consultant Fee. ISA shall pay to K&R in cash a consultant fee for its performance of the Consulting Activities in the sum of Two Hundred Forty Thousand Dollars ($240,000) per year, payable in equal monthly installments of Twenty Thousand Dollars ($20,000) in advance, on or before the 1st day of each consecutive calendar month beginning January 1, 2012.”

Ratification. The Prior Agreement is hereby ratified, confirmed and reaffirmed in its entirety in all other respects.

Miscellaneous.


	(a)	Binding Effect. This Amendment shall inure to the benefit of and shall be binding upon K&R and its successors and assigns, and ISA and its successors and assigns; provided, however, that K&R shall not be entitled to assign or delegate any rights or obligations hereunder without the prior written consent of ISA.

	(b)	Governing Law. This Amendment shall be deemed to be made in, and in all respects shall be interpreted, construed and governed by and in accordance with, the laws of the Commonwealth of


		Kentucky.

	(c)	Counterparts. This Amendment may be signed by each party hereto upon a separate copy, in which event all of said copies shall constitute a single counterpart to this Amendment. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument, and it shall not be necessary, in making proof of this Amendment, to produce or account for more than one such counterpart.

	(d)	Entire Agreement. No additional or further amendment, change, modification or waiver shall be enforceable unless in writing and signed by the parties hereto.

The parties hereto have executed this Amendment as of the date first above written.

K&R, LLC, a Kentucky limited liability


By:	/s/ Harry Kletter

Title:	Chief Executive Officer


INDUSTRIAL SERVICES OF AMERICA, INC., a Florida corporation

By:	/s/ Harry Kletter

Title:	Chief Executive Officer

EX-10.54 5 c68719_ex10-54.htm

Exhibit 10.54

THIRD AMENDMENT TO CREDIT AGREEMENT

THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), entered into as of March 2, 2012 (the “Effective Date”), by and among INDUSTRIAL SERVICES OF AMERICA, INC., a Florida corporation (“ISA”), ISA INDIANA, INC., an Indiana corporation (“ISA Indiana”), the Lenders party hereto, and FIFTH THIRD BANK, an Ohio banking corporation (“Fifth Third”), in its capacity as Agent for Lenders and LC Issuer under this Agreement (“Agent”) and as LC Issuer and a Lender, is as follows:

Preliminary Statements

A. ISA and ISA Indiana (each a “Borrower” and, collectively, “Borrowers”), Agent, LC Issuer and the Lenders entered into that certain Credit Agreement dated as of July 30, 2010, as amended by the First Amendment to Credit Agreement dated as of April 14, 2011and the Second Amendment to Credit Agreement (the “Second Amendment”) dated as of November 16, 2011 (as modified, extended, amended or restated from time to time, the “Credit Agreement”). Capitalized terms used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B. Borrowers have requested that Agent, LC Issuer and the Lenders: (i) waive certain Events of Default; (ii) modify the Senior Leverage Ratio as specifically set forth herein and (iii) amend certain other provisions of the Credit Agreement.

C. Agent, LC Issuer and the Lenders are willing to so amend the Credit Agreement, all on the terms, and subject to the conditions, of this Amendment.

Statement of Amendment

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Agent, LC Issuer and the Lenders and Borrowers hereby agree as follows:

1. Amendments to Credit Agreement. Subject to the satisfaction of the conditions of this Amendment, the Credit Agreement is hereby amended as follows:

1.1 The following definitions are hereby added to Section 1.2 of the Credit Agreement in their proper alphabetical order:


	“Third Amendment” means the Third Amendment to Credit Agreement among Agent, LC Issuer, the Lenders and Borrowers dated to be effective as of March 2, 2012.

	“Third Amendment Effective Date” means March 2, 2012.

1.2 The following definitions in Section 1.2 of the Credit Agreement are hereby amended in their entirety by substituting the following in their respective steads:


	“Test Period” means, with respect to a particular Computation Date, the period of four (4) consecutive Fiscal Quarters ending on such Computation Date (i.e., a rolling four (4) consecutive Fiscal Quarter


	period). The first Test Period for the purposes of this Agreement shall be the Fiscal Quarter ending on March 31, 2012; provided that for purposes of the determination of the: (i) Senior Leverage Ratio as of the Computation Date for the Fiscal Quarters ending on March 31, 2012, June 30, 2012, and September 30, 2012, Consolidated Adjusted EBITDA, as of each such Fiscal Quarter then ended, shall be an amount equal to the product of: (a) Consolidated Adjusted EBITDA for the period beginning on January 1, 2012 and ending on each such Fiscal Quarter then ended, divided by the total number of days for the period beginning on January 1, 2012 and ending on such Fiscal Quarter then ended and multiplied by (b) 365; and (ii) Fixed Charge Coverage Ratio as of the Computation Date for the Fiscal Quarter ending: (a) on March 31, 2012, Consolidated Adjusted EBITDA and Consolidated Fixed Charges shall equal the amount of Consolidated Adjusted EBITDA and Consolidated Fixed Charges for the period commencing on January 1, 2012 through, and including, March 31, 2012; (b) on June 30, 2012, Consolidated Adjusted EBITDA and Consolidated Fixed Charges shall equal the amount of Consolidated Adjusted EBITDA and Consolidated Fixed Charges for the period commencing on January 1, 2012 through, and including, June 30, 2012; and (c) on September 30, 2012, Consolidated Adjusted EBITDA and Consolidated Fixed Charges shall equal the amount of Consolidated Adjusted EBITDA and Consolidated Fixed Charges for the period commencing on January 1, 2012 through, and including, September 30, 2012.

	“Unused Line Fee” means a fee payable pursuant to Section 6.9(a) at a rate per annum equal to 0.75% (computed on the basis of a 360-day year for the actual number of days elapsed) on the daily amount of the Maximum Revolving Commitment less the aggregate outstanding Revolving Loans and Letter of Credit Exposure.

1.3 Section7.1 of the Credit Agreement is hereby amended in its entirety by substituting the following in its stead:


	Section 7.1 Senior Leverage Ratio. Borrowers shall not permit the Senior Leverage Ratio for (a) the Test Period ending on the Computation Date occurring on March 31, 2012 to exceed 4.25 to 1; (b) the Test Periods ending on the Computation Dates occurring on June 30, 2012 and September 30, 2012 to exceed 3.50 to 1; and (c) each Test Period ending on each Computation Date occurring on or after December 31, 2012 to exceed 3.25 to 1.

1.4 Exhibit D of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Exhibit D in its stead.

2. Waiver of Covenant Defaults. Events of Default have occurred under (i) Section 7.1 of the Credit Agreement in connection with the Senior Leverage Ratio Financial Covenant for the Fiscal Quarter ending on December 31, 2011 and (ii) Section 7.2 of the Credit Agreement in connection with the Fixed Charge Coverage Ratio Financial Covenant for the Fiscal Quarter ending on December 31, 2011 (collectively, the “Existing Defaults”). Borrowers have requested that Agent, LC Issuer and the Lenders waive the Existing Defaults. Agent, LC Issuer and the Lenders hereby waive the Existing Defaults. The

waiver provided in this Section 2 will not apply to any other Event of Default, whether past, present, or future, including, without limitation, any violations of the above described Financial Covenants as of dates occurring after the dates specifically referenced in this Section 2. The waiver provided in this Section 2, either alone or together with other waivers which Agent, LC Issuer and the Lenders may give from time to time, shall not, by course of dealing, implication or otherwise, obligate Agent, LC Issuer and the Lenders to waive any Event of Default past, present or future, other than the Events of Default specifically waived by this Amendment, or reduce, restrict or in any way affect the discretion of Agent, LC Issuer and the Lenders in considering any future waiver requested by Borrowers. The foregoing Events of Default will not be deemed to limit or estop Agent, LC Issuer or the Lenders from exercising any rights or remedies with respect to any other Event of Default.

3. Consultant; Cash Flow Forecast. Borrowers hereby agree to continue to retain Consultant (as defined in the Second Amendment) and to deliver the Cash Flow Forecast (as defined in the Second Amendment) to Agent in accordance with the provisions of Section 3 of the Second Amendment.

4. Reaffirmation of Cross-Guaranties. Each of the Borrowers (collectively, the “Cross-Guarantors”) hereby (i) confirms, ratifies and reaffirms its respective Cross-Guaranty and (ii) acknowledges and agrees that no Cross-Guarantor is released from its obligations under its respective Cross-Guaranty by reason of this Amendment and that the obligations of each Cross-Guarantor under its respective Cross-Guaranty extend to the Credit Agreement and the other Loan Documents as amended by, or in connection with, this Amendment. This reaffirmation of each Cross-Guarantor’s Cross-Guaranty shall not be construed, by implication or otherwise, as imposing any requirement that Agent notify or seek the consent of any Cross-Guarantor relative to any past or future extension of credit, amendment or modification, extension or other action with respect thereto, in order for any such extension of credit, amendment or modification, extension or other action with respect thereto to be subject to a Cross-Guarantor’s Cross-Guaranty, it being expressly acknowledged and reaffirmed that each Cross-Guarantor has under its respective Cross-Guaranty consented, among others things, to modifications, amendments, extensions and other actions with respect thereto without any notice thereof or any further consent thereto.

5. Reaffirmation of Guaranty and Security. As a condition of this Amendment, on the Effective Date, Borrowers will cause each Guarantor to execute and deliver to Agent the Reaffirmation of Guaranty and Security provided after the signatures below and incorporated by reference herein.

6. Additional Conditions; Other Documents. As a condition of this Amendment, Borrowers will deliver to Agent, on or before the execution of this Amendment, (i) a copy, certified by the Secretary of each Borrower, of resolutions of the Board of Directors of Borrowers, authorizing the execution of this Amendment and all other documents executed in connection herewith, which certificate and resolutions will be in form and substance acceptable to Agent; (ii) a copy, certified by the Secretary of each Guarantor of resolutions of the sole member of each Guarantor authorizing the execution of the Reaffirmation of Guaranty and Security and all other documents executed in connection therewith, which certificate and resolutions will be in form and substance acceptable to Agent; and (iii) such other documents, instruments, and agreements deemed necessary or desirable by Agent to effect the amendments to Borrowers’ credit facilities with Agent, LC Issuer and the Lenders contemplated by this Amendment.

7. Reaffirmation of Security. Borrowers and Agent, LC Issuer and the Lenders hereby expressly intend that this Amendment shall not in any manner: (i) constitute the refinancing, refunding, payment or extinguishment of the existing Obligations as of the Effective Date; (ii) be deemed to evidence a novation of the outstanding balance of the Obligations; or (iii) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted

pursuant to any of the Security Documents. Borrowers ratify and reaffirm any and all grants of Liens to Agent in the Loan Collateral as security for the Obligations, and Borrowers acknowledge and confirm that the grant of the Liens to Agent in the Loan Collateral: (a) represent continuing Liens on all of the Loan Collateral, (b) secure all of the Obligations, and (c) represent valid, first and best Liens on all of the Loan Collateral except to the extent, if any, of the Permitted Liens.

8. Representations. To induce Agent, LC Issuer and the Lenders to accept this Amendment, each Borrower hereby represents and warrants to Agent, LC Issuer and the Lenders as follows:

8.1 Each Borrower has full power and authority to enter into, and to perform its obligations under, this Amendment and the other documents executed in connection therewith, and the execution and delivery of, and the performance of its obligations under and arising out of, this Amendment have been duly authorized by all necessary corporate action.

8.2 This Amendment constitutes the legal, valid and binding obligations of each Borrower, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally.

8.3 Each Borrower’s representations and warranties contained in the Credit Agreement are complete and correct as of the Effective Date with the same effect as though these representations and warranties had been made again on and as of the Effective Date, subject to those changes as are not prohibited by, or do not constitute Events of Default under, the Credit Agreement.

8.4 No Event of Default has occurred and is continuing under the Credit Agreement, other than the Existing Defaults.

9. Costs and Expenses; Covenant Waiver Fee. As a condition of this Amendment, (i) Borrowers will pay to Agent a covenant waiver fee of $10,000, payable in full on the Effective Date; such fee, when paid, will be fully earned and non-refundable under all circumstances, and (ii) Borrowers will promptly on demand pay or reimburse Agent for the costs and expenses incurred by Agent in connection with this Amendment, including, without limitation, attorneys’ fees.

10. Release. Borrowers hereby release Agent, LC Issuer and the Lenders from any and all liabilities, damages and claims arising from or in any way related to the Obligations or the Loan Documents, other than such liabilities, damages and claims which arise after the execution of this Amendment. The foregoing release does not release or discharge, or operate to waive performance by, Agent, LC Issuer and the Lenders of its express agreements and obligations stated in the Loan Documents on and after the Effective Date.

11. Default. Any default by Borrowers in the performance of Borrowers’ obligations under this Amendment shall constitute an Event of Default under the Credit Agreement.

12. Continuing Effect of the Credit Agreement. Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect.

13. One Agreement; References; Fax Signature. The Credit Agreement, as amended by this Amendment, will be construed as one agreement. All references in any of the Loan Documents to the Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment. This Amendment may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof, and if so signed, (a) may be relied on by each party as if the document were a manually signed original and (b) will be binding on each party for all purposes.

14. Captions. The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

15. Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

16. Entire Agreement. This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment.

17. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles).

[Signature Page Follows]

IN WITNESS WHEREOF, Borrowers have executed this Amendment to be effective as of the Effective Date.


	INDUSTRIAL SERVICES OF AMERICA, INC.

	By:	/s/ Robert D. Coleman

		Robert D. Coleman, Chief Financial Officer

	ISA INDIANA, INC.

	By:	/s/ Robert D. Coleman

		Robert D. Coleman, Chief Financial Officer

Accepted as of the Effective Date.

FIFTH THIRD BANK, as Agent


By:	/s/ Jason McCaw

	Jason McCaw, Assistant Vice President

FIFTH THIRD BANK, as Lender

By:	/s/ Jason McCaw

	Jason McCaw, Assistant Vice President

FIFTH THIRD BANK, as LC Issuer

By:	/s/ Jason McCaw

	Jason McCaw, Assistant Vice President

REAFFIRMATION OF GUARANTY AND SECURITY

In satisfaction of the condition set forth in the Third Amendment to Credit Agreement between Agent, LC Issuer, the Lenders and Borrowers (the “Amendment”), the undersigned (“Guarantors”) hereby: (i) consent to the Amendment and to the transactions contemplated therein, (ii) ratify and reaffirm their Guaranty dated as of July 30, 2010 (the “Guaranty”), (iii) acknowledge and agree that Guarantors are not released from their obligations under the Guaranty by reason of the Amendment or the transactions contemplated thereby and that the obligations of Guarantors under the Guaranty extend to the Credit Agreement and the other Loan Documents, as amended, or as amended and restated, in connection with the Amendment, and (iv) confirm that the Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the indebtedness evidenced by the existing Loan Documents and secured by their Security Agreement dated as of July 30, 2010 (the “Security Agreement”); (b) be deemed to evidence a novation of the outstanding balance of the indebtedness secured by the Security Agreement; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to the Security Agreement or any other Security Document evidencing, governing or creating a Lien on the Loan Collateral. Guarantors further ratify and reaffirm any and all grants of Liens to Agent on the Loan Collateral to secure Guarantors’ obligations owing under the Guaranty, and Guarantors acknowledge and confirm that the grants of the Liens to Agent on Guarantors’ Loan Collateral: (A) represent continuing Liens on all such Loan Collateral, (B) secure all of the Guaranteed Obligations (as defined in the Guaranty), and (C) represent valid, first and best Liens on all such Loan Collateral, subject to the Permitted Liens.

This Reaffirmation of Guaranty and Security shall not be construed, by implication or otherwise, as imposing any requirement that Agent notify or seek the consent of Guarantors relative to any past or future extension of credit, or modification, extension or other action with respect thereto, in order for any such extension of credit or modification, extension or other action with respect thereto to be subject to the Guaranty or the Security Agreement, it being expressly acknowledged and reaffirmed that Guarantors have under the Guaranty and the Security Agreement consented, among others things, to modifications, extensions and other actions with respect thereto without any notice thereof or further consent thereto. All references in any of the Loan Documents to the Guaranty will be deemed to be references to the Guaranty as amended by this Reaffirmation of Guaranty and Security. This Reaffirmation of Guaranty and Security may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof, and if so signed, (i) may be relied on by each party and Fifth Third Bank as if this Reaffirmation of Guaranty and Security were a manually signed original and (ii) will be binding on each party for all purposes. All capitalized terms used in this Reaffirmation of Guaranty and Security and not otherwise defined herein shall have the meanings ascribed thereto in the Amendment.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned have executed this Reaffirmation of Guaranty and Security as of the Effective Date.


	ISA Indiana Real Estate, LLC
	ISA Logistics LLC
	ISA Real Estate, LLC
	7021 Grade Lane LLC
	7124 Grade Lane LLC
	7200 Grade Lane LLC
	Computerized Waste Systems, LLC
	ISA Recycling LLC
	Waste Equipment Sales & Service Co., LLC

	By: Industrial Services of America, Inc., sole member


	By:	/s/ Robert D. Coleman

		Robert D. Coleman, Chief Financial Officer

Accepted as of the Effective Date.

FIFTH THIRD BANK, as Agent


By:	/s/ Jason McCaw

	Jason McCaw, Assistant Vice President

EXHIBIT D

COMPLIANCE CERTIFICATE

For the [Quarterly] [Annual] Test Period
from _______________, 20___
to ___________, 20___

Fifth Third Bank, as Agent
38 Fountain Square Plaza
MD#10AT63
Cincinnati, Ohio 45263
Attn: Jason McCaw, Assistant Vice President
Fax Number: (513) 534-8400

Ladies and Gentlemen:

This Compliance Certificate (this “Certificate”) is delivered to you pursuant to Sections 6.1(a) and 6.1(b) of the Credit Agreement dated as of July 30, 2010, among INDUSTRIAL SERVICES OF AMERICA, INC., a Florida corporation (“ISA”), ISA INDIANA, INC., an Indiana corporation (“ISA Indiana” and together with ISA, collectively, “Borrowers”), the Lenders (as defined in the Credit Agreement) party thereto, and FIFTH THIRD BANK, as Agent (“Agent”) for the Lenders and the LC Issuer, as amended by the First Amendment to Credit Agreement dated as of April 14, 2011, the Second Amendment to Credit Agreement dated as of November 16, 2011, and the Third Amendment to Credit Agreement dated as of March 2, 2012 (such Credit Agreement, as it now exists or as it may be amended, modified or restated from time to time, is referred to as the “Credit Agreement”). Unless otherwise stated in this Certificate, capitalized terms used in this Certificate shall have the meanings ascribed to them in the Credit Agreement.

The undersigned hereby certifies to Agent and the Lenders (“you”) as follows:

1. The undersigned is, and at all times during the Subject Period was, the duly elected, qualified and acting [Insert correct title: chief financial officer, chief operating officer OR chief executive officer] of ISA.

2. The undersigned has reviewed the provisions of the Credit Agreement and the other Loan Documents (collectively, the “Documents”) and has reviewed the activities of the Credit Parties during the period from ____________, 20__, to ______________, 20__ (the “Subject Period”) with a view towards determining whether, during the Subject Period, the Credit Parties have kept, observed, performed and fulfilled all of their respective obligations under the Documents.

3. The financial statements of the Credit Parties delivered to you concurrently herewith (the “Financial Statements”)[, while not examined by the Accountants,] reflect [in the undersigned’s opinion] all adjustments necessary to present fairly, in all material respects, the Consolidated financial position of the Credit Parties as at the end of the Subject Period and the results of their operations for the Subject Period then ended in conformity with GAAP consistently applied[, subject only to normal year-end adjustments and the absence of footnotes].

[Delete bracketed statements for Annual Certificate.]

4. As of the date of this Certificate, to the best of the undersigned’s knowledge, after reasonable inquiry, no event has occurred which constitutes a Default or an Event of Default. (If a Default or an Event of Default has occurred and is continuing, Schedule A contains a statement as to the nature thereof and the action which the Credit Parties have taken or propose to take with respect thereto).

5. In particular, the calculations shown on Schedule B attached hereto demonstrate compliance with the Financial Covenants as set forth in Article VII of the Credit Agreement. (If there is not compliance with any Financial Covenant, Schedule B (i) lists the same and sets forth what action the Credit Parties have taken or propose to take with respect thereto and (ii) explains the variances of the figures in the Financial Statements from the Projections). Schedule B attached hereto also describes and analyzes in detail all material trends, changes, and development in each and all Financial Statements.

6. Attached hereto as Schedule C are summaries of accounts payable agings, Receivable agings, and Inventory, in each case reconciled to the Credit Parties’ general ledger and Borrowing Base Certificate for the end of the Subject Period.

7. [Annual:] Attached hereto as Schedule D are Projections of the Credit Parties for the period from ____________, 20___ to ______________, 20___. Schedule D states: (i) the assumptions on which the Projections were prepared and (ii) that the assumptions, except as otherwise noted on Schedule D, were prepared on a consistent basis with the operation of the Credit Parties’ business during the immediately preceding Fiscal Year and with factors known to exist as of the date of this Certificate or anticipated to exist during the periods covered by the Projections. The undersigned certifies that he or she has no reason to believe that the Projections, subject to the assumptions stated on Schedule D, are false or misleading in any material respect. The Credit Parties make no representations or warranties regarding the accuracy of any projections, predictions or other estimation of future events, or any information or data, in each case, pertaining generally to the Credit Parties’ respective industries.

Dated: _______________, 20__


	By:

	Name:

	Title:

Schedules:

A – Defaults and Events of Default

B – Financial Covenant Calculations

C – Summaries of Accounts Receivable, Accounts Payable and Inventory Values

D – Projections

Schedule A
to
Compliance Certificate

(Description of any Defaults or Events of Default)

Schedule B
to
Compliance Certificate

(Financial Covenant Calculations¹)


I.	Maximum Senior Leverage Ratio:

	A.	Computation Date: For Test Period Ended _______________, 20___

	B.	Required Covenant:


Computation Date	Maximum Senior Leverage Ratio

March 31, 2012		4.250 to 1
June 30, 2012		3.50 to 1
September 30, 2012		3.50 to 1
December 31, 2012		3.250 to 1
March 31, 2013		3.250 to 1
June 30, 2013		3.250 to 1


	C.	Actual Computation: _______________: 1


	Consolidated Adjusted EBITDA Computation (for the applicable Test Period):


1.	Net Income	$	________________

2.	Plus: to the extent deducted in determining Net Income and Consolidated EBITDA for such period:

a.	Interest Expense	$	________________

b.	Tax expense	$	________________

c.	Amortization and Depreciation expenses	$	________________

d.	Non-cash compensation for issuance of Equity Interests and Capital Securities	$	________________

e.	Non-cash extraordinary or non-recurring non-cash charges or non-cash losses	$	________________



1	Per definitions in, and as determined by, the Credit Agreement.


f.	Non-cash charges under Rate Management Agreements	$	________________

3.	Subtotal (2a + 2b + 2c + 2d + 2e + 2f) =	$	________________

4.	Minus: to the extent included in Net Income and Consolidated EBITDA for such period:

a.	Non-cash extraordinary or non-cash non-recurring income or gains	$	________________

b.	Gains from sales of capital Property	$	________________

c.	Gains from write-up of Property	$	________________

5.	Subtotal (4a + 4b + 4c) =	$	________________

6.	Total (1 + 3 - 5) =	$	________________


II.	Minimum Fixed Charge Coverage Ratio:

	A.	Computation Date: For Test Period Ended _______________, 20___

	B.	Required Covenant:


Computation Date	Maximum Leverage Ratio

March 31, 2012 and each Computation Date thereafter		1.20 to 1


	C.	Actual Computation: _______________________ : 1


1.	Consolidated Adjusted EBITDA (as computed under I above) for the Test Period	$	________________

2.	Minus:

a.	Cash Non-financed Capital Expenditures for such Test Period	$	________________

b.	Income, franchise, commercial activity Taxes or equivalent income-type Taxes paid in cash for such Test Period	$	________________

3.	Subtotal (1 – 2a – 2b) =	$	________________

4.	#3 Divided by (the sum of):

a.	Consolidated Fixed Charges (see below) for the Test Period	$	________________

b.	Dividends or distributions (including Share Repurchases) paid by Parent to its stockholders in cash for the Test Period	$	________________

5.	Subtotal (4a + 4b) =	$	________________

6.	Ratio (3 ÷ 5) =	$	________________


	Consolidated Fixed Charges Computation (for the applicable Test Period):


1.	Interest Expense paid in cash	$	________________

	Plus:

2.	Scheduled payments of principal on Indebtedness for Borrowed Money, including principal component of any Capital Lease	$	________________

3.	Total (1 + 2) =	$	________________


III.	Limitation on Capital Expenditures:


	A.	Computation Date: For Test Period Ended ______________, 20__

	B.	Required Covenant:


Computation Date	Maximum Aggregate Cumulative Capital Expenditures

For each Fiscal Year ending on or after December 31, 2010	$	4,000,000

C. Actual Amount: $__________ [which is net of the aggregate costs of the 7100 Grade Lane Real Property Acquisition of $_________________].

IV. Further Description. If there is not compliance with any Financial Covenant, below (i) sets forth what action the Credit Parties have taken or propose to take with respect thereto and (ii) explains the variances of the figures in the Financial Statements from the Projections (as defined in the Credit Agreement). Also below is a description and analysis of all material trends, changes, and development in each and all Financial Statements:

Schedule C
to
Compliance Certificate

(Summaries of Accounts Receivable, Accounts Payable, and Inventory Values)

Schedule D
to
Compliance Certificate

(Projections)

EX-31.1 6 c68719_ex31-1.htm

Exhibit 31.1

CERTIFICATIONS

I, Harry Kletter, certify that:

                    a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
                    b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
                    c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
                    d) disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrants’ fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
                    5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
                    a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
                    b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


March 7, 2012		/s/ Harry Kletter

Date		Harry Kletter, Chief Executive Officer

EX-31.2 7 c68719_ex31-2.htm

Exhibit 31.2

CERTIFICATIONS

I, Robert D. Coleman, certify that:

     1. I have reviewed the Form 10-K for the year ended December 31, 2011 of Industrial Services of America, Inc.;
      2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
      3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
      4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
          a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
          b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
          c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
          d) disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrants’ fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
      5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
          a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
          b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


March 7, 2012		/s/ Robert D. Coleman

Date		Robert D. Coleman, Chief Financial Officer

EX-32.1 8 c68719_ex32-1.htm

Exhibit 32.1

CERTIFICATIONS

Harry Kletter and Robert D. Coleman, being the Chief Executive Officer and Chief Financial Officer, respectively, of Industrial Services of America, Inc., hereby certify as of this 7^th day of March, 2012, that the Form 10-K for the year ended December 31, 2011, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-K/A fairly presents, in all material respects, the financial condition and results of operations of Industrial Services of America, Inc.


	/s/ Harry Kletter

	Harry Kletter, Chief Executive Officer

	/s/ Robert D. Coleman

	Robert D. Coleman, Chief Financial Officer

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7300000 INDUSTRIAL SERVICES OF AMERICA INC /FL 10-K --12-31 6940517 48420206 false 0000004187 Yes No Smaller Reporting Company No 2011 FY 2011-12-31

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business: The Recycling division of Industrial Services of America, Inc. and its subsidiaries (ISA) purchases and sells ferrous and nonferrous materials, including stainless steel, and fiber scrap on a daily basis at our two wholly owned subsidiaries, ISA Recycling, LLC (located in Louisville, Kentucky) and ISA Indiana, Inc. (serving southern Indiana). We expanded this division into the stainless steel recycling market for super alloys and high-temperature metals in 2009. The multi-million dollar shredder project, completed in June 2009, expands our processing capacity, offers specialty grades of scrap and improves end-product quality. The shredder began operations on July 1, 2009. Through the Waste Services division (see the Segment information at Note 12), ISA also provides products and services to meet the waste management needs of its customers related to ferrous, non-ferrous and corrugated scrap recycling, management services and waste equipment sales and rental. This division represents contracts with retail, commercial and industrial businesses to handle their waste disposal needs, primarily by subcontracting with commercial waste hauling and disposal companies. Our customers and subcontractors are located throughout the United States. This division also installs or repairs equipment and rental equipment on a timely basis. Each of our segments bills separately for its products or services. Generally, services and products are not bundled for sale to individual customers. The products or services have value to the customer on a standalone basis. Revenue Recognition: ISA records revenue for its recycling and equipment sales divisions upon delivery of the related materials and equipment to the customer. We provide installation and training on all equipment and we charge these costs to the customer, recording revenue in the period we provide the service. We are the middleman in the sale of the equipment and not a manufacturer. Any warranty is the responsibility of the manufacturer and therefore we make no estimates for warranty obligations. Allowances for equipment returns are made on a case-by-case basis. Historically, returns of equipment have not been material. Our management services group provides our customers with evaluation, management, monitoring, auditing and cost reduction of our customers’ non-hazardous solid waste removal activities. We recognize revenue related to the management aspects of these services when we deliver the services. We record revenue related to this activity on a gross basis because we are ultimately responsible for service delivery, have discretion over the selection of the specific service provided and the amounts to be charged, and are directly obligated to the subcontractor for the services provided. We are an independent contractor. If we discover that third party service providers have not performed, either by auditing of the service provider invoices or communications from our customers, we then resolve the service delivery dispute directly with the third party service supplier. We record sales-type leases at the net present value of future minimum lease payments. Interest income related to the lease is recognized over the life of the lease. At the inception of the lease, any difference between the net present value of future cash flows and the basis of the leased asset (carrying value plus initial direct costs, less present value of any residual) is recorded as a gain or loss. Cash and Cash Equivalents: Cash and cash equivalents includes cash in banks with original maturities of three months or less. Cash and cash equivalents are stated at cost which approximates market value, which in the opinion of management, are subject to an insignificant risk of loss in value. We maintain a cash account on deposit with BB&T which serves as collateral for our interest rate swap agreements. This compensating balance arrangement is verbal only and does not legally restrict the use of these funds. As of December 31, 2011, the balance in this account was $653.1 thousand. Accounts Receivable and Allowance for Doubtful Accounts: Accounts receivable consists primarily of amounts due from customers from product and brokered sales. The allowance for doubtful accounts totaled $100.0 thousand at December 31, 2011 and December 31, 2010. Our determination of the allowance for doubtful accounts includes a number of factors, including the age of the balance, past experience with the customer account, changes in collection patterns and general economic and industry conditions. Interest is not normally charged on receivables nor do we normally require collateral for receivables. Potential credit losses from our significant customers could adversely affect our results of operations or financial condition. While we believe our allowance for doubtful accounts is adequate, changes in economic conditions or any weakness in the steel and metals industry could adversely impact our future earnings. In general, we consider accounts receivable past due 30 to 60 days after the invoice date. We charge off losses to the allowance when we deem further collection efforts will not provide additional recoveries. Major Customer: North American Stainless (NAS) is a major customer in our Recycling segment. Sales to NAS equaled 44.4% of our consolidated revenue in 2011, and 63.7% of our consolidated revenue in 2010, and the loss of NAS would have a material adverse effect on our financial statements. The accounts receivable balance from NAS was $8.5 million and $13.6 million as of December 31, 2011 and 2010, respectively. Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, ISA Indiana, Inc., ISA Recycling, LLC, Industrial Logistics, and ISA Alloys. Upon consolidation, all intercompany accounts, transactions and profits have been eliminated. Common Control: We conduct significant levels of business (see Note 6) with K&R, LLC (“K&R”), which is owned by ISA’s chief executive officer and principal shareholder. Because these entities are under common control, our operating results or our financial position may be materially different from those that would have been obtained if the entities were autonomous. Estimates: In preparing the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America, management must make estimates and assumptions. These estimates and assumptions affect the amounts reported for assets, liabilities, revenues and expenses, as well as affecting the disclosures provided. Examples of estimates include the allowance for doubtful accounts, estimates associated with annual goodwill impairment tests, and estimates of deferred income tax and liabilities. The Company also uses estimates when assessing fair values of assets and liabilities acquired in business acquisitions as well as any fair value and any related impairment charges related to the carrying value of machinery and equipment, and other long-lived assets. Despite the Company’s intention to establish accurate estimates and use reasonable assumptions, actual results may differ from these estimates. Inventories: Our inventories primarily consist of ferrous and non-ferrous, including stainless steel, scrap metals and fiber scrap and are valued at the lower of average purchased cost or market using the specific identification method. Quantities of inventories are determined based on our inventory systems and are subject to periodic physical verification using estimation techniques including observation, weighing and other industry methods. We recognize inventory impairment when the market value, based upon current market pricing, falls below recorded value or when the estimated volume is less than the recorded volume of inventory. We record the loss in cost of goods sold in the period during which we identified the loss. We make certain assumptions regarding future demand and net realizable value in order to assess whether inventory is properly recorded at the lower of cost or market. We base our assumptions on historical experience, current market conditions and current replacement costs. If the anticipated future selling prices of scrap metal and finished steel products should decline, we would re-assess the recorded net realizable value of our inventory and make any adjustments we feel necessary in order to reduce the value of our inventory (and increase cost of goods sold) to the lower of cost or market. In the third quarter of 2011, demand and prices for inventory decreased due to reduced demand for stainless steel arising from weakening economic conditions, which led to a reduction in stainless steel sales volumes and average stainless steel selling prices. In addition, continued weak demand and the impact of declines in anticipated future selling prices which outpaced the decline in inventory costs, resulted in ISA recording a non-cash net realizable value (“NRV”) inventory write-down of $3.4 million. Some commodities are in saleable condition at acquisition. We purchase these commodities in small amounts until we have a truckload of material available for shipment. Some commodities are not in saleable condition at acquisition. These commodities must be torched, sheared, shredded or baled. We do not have work-in-process inventory that needs to be manufactured to become finished goods. We include processing costs in inventory for all commodities by gross ton. <table width="90%" border="0" align="center" cellpadding="0" cellspacing="0"> <tr style="FONT-SIZE:1PX"> <td width="45%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="11" valign="bottom"> December 31, 2011 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="11" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Raw Materials </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Finished Goods </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Processing Costs </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Total </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="11" valign="bottom"> (in thousands) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Stainless steel, ferrous and non-ferrous materials </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 14,633 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,409 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 777 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 16,819 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Waste equipment machinery </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 39 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 39 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Other </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 63 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 63 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Total inventories for sale </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 14,633 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,511 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 777 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 16,921 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Replacement parts </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,623 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,623 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Total inventories </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 16,256 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 1,511 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 777 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 18,544 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> <table border="0" cellspacing="0" cellpadding="0" width="90%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="45%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="11" valign="bottom"> December 31, 2010 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="11" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Raw Materials </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Finished Goods </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Processing Costs </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Total </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="11" valign="bottom"> (in thousands) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Stainless steel, ferrous and non-ferrous materials </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 30,546 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,203 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,115 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 32,864 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Waste equipment machinery </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 75 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 75 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Other </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 59 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 59 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Total inventories for sale </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 30,546 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,337 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,115 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 32,998 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Replacement parts </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,313 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,313 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Total inventories </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 31,859 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 1,337 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 1,115 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 34,311 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> We charged $777.4 thousand in general and administrative processing costs to cost of sales for the year ended December 31, 2011 and $1.1 million for the year ended December 31, 2010. We charged freight expense to cost of goods sold. On January 4, 2010, ISA elected to refine its method of valuing its inventory to the specific identification method, whereas in all prior years inventory was valued using the weighted average method. The new method was adopted due to a change in the inventory software, which now provides the ability to specifically track and identify individual scrap metal commodities within the system. This method provides a more accurate value of the inventory and will apply for all future periods. As the previous software did not have this tracking ability, management considers it impracticable to retrospectively apply the method for prior period comparative financial statements, as required by FASB’s authoritative guidance entitled “Accounting Changes and Error Corrections”. This change in inventory valuation method did not have a significant impact on our operations or financial statements. Inventory also includes all types of industrial waste handling equipment and machinery held for resale such as compactors, balers, and containers. Replacement parts included in Inventory are depreciated over a one-year life and are used by the Company within the one-year period as these parts wear out quickly due to the high-volume and intensity of the shredder function. Other inventory includes miscellaneous equipment, cardboard, fuel, and baling wire. Property and Equipment: Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the related property. Assets under capital lease obligations would be amortized over the term of the capital lease; as of December 31, 2011, we do not have any assets under capital lease obligations. Property and equipment, in thousands, as of December 31, 2011 and 2010 consist of the following: <table border="0" cellspacing="0" cellpadding="0" width="90%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="60%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="10%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="7%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="7%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> Life </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2011 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2010 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr style="background-color: #E5FFFF;"> <td valign="bottom"> Land </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 6,026 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 5,872 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Equipment and vehicles </td> <td valign="bottom">   </td> <td valign="bottom"> 1-10 years </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 26,979 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 25,733 </td> <td valign="bottom">   </td> </tr> <tr style="background-color: #E5FFFF;"> <td valign="bottom"> Office equipment </td> <td valign="bottom">   </td> <td valign="bottom"> 1-7 years </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,481 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,313 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Rental equipment </td> <td valign="bottom">   </td> <td valign="bottom"> 3-5 years </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 5,046 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 5,133 </td> <td valign="bottom">   </td> </tr> <tr style="background-color: #E5FFFF;"> <td valign="bottom"> Building and leasehold improvements </td> <td valign="bottom">   </td> <td valign="bottom"> 5-40 years </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 8,271 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 7,733 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="top"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="top"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="top"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="top"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 48,803 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 46,784 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr style="background-color: #E5FFFF;"> <td valign="bottom"> Less accumulated depreciation and amortization </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 22,604 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 19,230 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="top"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="top"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="top"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="top"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 26, 199 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 27,554 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="top"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="top"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="top"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="top"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> Depreciation expense for the years ended December 31, 2011, 2010 and 2009 was $3.8 million, $3.5 million, and $2.8 million, respectively. Of the $3.8 million depreciation expense recognized in 2011, $2.6 million was recorded in cost of sales, and $1.2 million was recorded in general and administrative expense. Of the $3.5 million depreciation expense recognized in 2010, $2.8 million was recorded in cost of sales, and $0.7 million was recorded in general and administrative expense. A typical term of our rental equipment leases is five years. The revenue stream is based on monthly usage and recognized in the month of usage. We record purchased rental equipment, including all installation and freight charges, as a fixed asset. We are typically responsible for all repairs and maintenance expenses on rental equipment. Based on existing agreements, future operating lease revenue from rental equipment for each of the next five years, in thousands, is estimated to be: <table border="0" align="center" cellspacing="0" cellpadding="0" width="26%"> <tr style="FONT-SIZE:1PX"> <td width="53%" valign="bottom">   </td> <td width="11%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="26%" valign="bottom">   </td> <td width="5%" valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> 2012 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,489 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> 2013 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,017 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> 2014 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 759 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> 2015 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 535 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> 2016 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 214 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 4,014 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> Goodwill and Other Intangible Assets: Goodwill and certain intangible assets are no longer amortized but are assessed at least annually for impairment with any such impairment recognized in the period identified. We perform our annual goodwill impairment test internally at December 31 and at the level of the recycling reporting units to which all the goodwill is related. We determine whether to impair goodwill by comparing the fair value of the recycling reporting unit as a whole (the present value of expected cash flows) to its carrying value including goodwill. Since the recycling reporting unit’s fair value exceeds its carrying value, no further computations are required. See also Note 13 – “Purchase of Inventory, Fixed Assets, and Intangible Assets of Venture Metals, LLC” for additional information on the purchased intangibles and the goodwill valuation performed by an outside service. Intangibles: Purchased intangible assets are initially recorded at cost and finite life intangible assets are amortized over their useful economic lives on a straight line basis. Intangible assets having indefinite lives and intangible assets that are not yet ready for use are not amortized and are reviewed annually for impairment in accordance with Note 1 – “Summary of Significant Accounting Policies – Fair Value of Financial Instruments.” Intangible assets are considered to have indefinite lives when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate cash flows for the Company. The factors considered in making this determination include the existence of contractual rights for unlimited terms and the life cycles of the products and processes that depend on the asset. See also Note 13 – “Purchase of Inventory, Fixed Assets, and Intangible Assets of Venture Metals, LLC” for additional information on the purchased intangibles.      We have the following intangible assets, in thousands, as of December 31, 2011: <table border="0" cellspacing="0" cellpadding="0" width="85%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="56%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="11%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Gross Carrying Value </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Accumulated Amortization </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Net Carrying Value </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Amortized intangible assets </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Venture Metals, LLC trade name </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 730 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (219 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> 511 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Non-compete agreements </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 620 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (186 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 434 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Venture Metals, LLC customer list </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 4,800 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (720 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> 4,080 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Total intangible assets </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,150 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> (1,125 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 5,025 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> We amortize the trade name and non-compete agreements using a method that reflects the pattern in which the economic benefits are consumed or otherwise used over a 5-year life as stated in the agreements. We amortize the customer list on a straight-line basis over a 10-year life as estimated by management. We incurred amortization expense related to these assets of $750.0 thousand and $375.0 thousand for the years ended December 31, 2011 and 2010, respectively. We did not incur any amortization expense for the year ended December 31, 2009. As of December 31, 2011, we expect amortization expense, in thousands, for these assets for the next five fiscal years and thereafter to be as follows: <table border="0" cellspacing="0" cellpadding="0" width="85%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="14%" valign="bottom">   </td> <td width="5%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="25%" valign="bottom">   </td> <td width="5%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="17%" valign="bottom">   </td> <td width="5%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="17%" valign="bottom">   </td> <td width="2%" valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Year </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Balance - Beginning of Year </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Amortization </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Balance - End of Year </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> 2012 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 5,025 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> (750 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 4,275 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> 2013 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 4,275 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (750 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> 3,525 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> 2014 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 3,525 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (750 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,775 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> 2015 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,775 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (615 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> 2,160 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> 2016 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,160 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (480 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,680 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Thereafter </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,680 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (1,680 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> </tr> </table> Derivative and Hedging Activities: The FASB’s authoritative guidance titled “Accounting for Derivative Instruments and Hedging Activities”, and subsequent amendments (hereinafter collectively referred to FASB’s guidance), contain numerous requirements including the recognition of derivative instruments in the financial statements at fair value. Derivatives that are not hedges must be adjusted to fair value through the statement of operations. If the derivative meets the requirements for hedge accounting in accordance with FASB’s guidance, depending on the nature of the hedge, changes in the fair value of the derivative are either offset against the corresponding change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value is immediately recognized in the statement of operations. We include the required disclosures in Note 3 – “Notes Payable to Bank” of our Notes to Consolidated Financial Statements. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in the statement of operations. Beginning in October, 2008, we began to utilize derivative instruments in the form of interest rate swaps to assist in managing our interest rate risk. We do not enter into any interest rate swap derivative instruments for trading purposes. We recognize as an adjustment to interest expense the differential paid or received on interest rate swaps. We include in other comprehensive income the change in the fair value of the interest rate swap, which is established as an effective hedge. Advertising Expense: Advertising costs are charged to expense in the period the costs are incurred. Advertising expense was $83.8 thousand, $218.9 thousand, and $237.8 thousand for the years ended December 31, 2011, 2010, and 2009, respectively. Accumulated Other Comprehensive Income (Loss): Comprehensive income is net income plus certain other items that are recorded directly to shareholders’ equity. Amounts included in other accumulated comprehensive loss for our derivative instruments are recorded net of the related income tax effects. The following table gives further detail regarding the composition of other accumulated comprehensive income (loss), in thousands, at December 31, 2011 and 2010. <table border="0" align="center" cellspacing="0" cellpadding="0" width="65%"> <tr style="FONT-SIZE:1PX"> <td width="83%" valign="bottom">   </td> <td width="4%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="7%" valign="bottom">   </td> <td width="2%" valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Total accumulated other comprehensive loss as of 1/1/10 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> (338 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> </tr> <tr> <td valign="bottom"> Net unrealized loss on derivative instruments, net of tax, during 2010 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (15 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Total accumulated other comprehensive loss as of 12/31/10 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (353 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> </tr> <tr> <td valign="bottom"> Net unrealized gain on derivative instruments, net of tax, during 2011 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 63 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Total accumulated other comprehensive loss as of 12/31/11 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> (290 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> Income Taxes: Deferred income taxes are recorded to recognize the tax consequences on future years of differences between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as “temporary differences”, and for net operating loss carryforwards subject to an ongoing assessment of realizability. Deferred income taxes are measured by applying current tax laws. The FASB has issued guidance, included in the ASC, related to the accounting for uncertainty in taxes recognized in financial statements. These new standards are effective for annual financial statements for fiscal years beginning after December 15, 2008. The company evaluates its uncertain tax positions and a loss contingency is recognized when it is probable that a liability has been incurred as of the date of the financial statements and the amount of the loss can be reasonably estimated. The amount recognized is subject to estimate and management’s judgment with respect to the likely outcome for each uncertain tax position. The amount that is ultimately sustained for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. The Company has no uncertain tax positions as of December 31, 2011, 2010, or 2009. The Company recognizes interest accrued related to unrecognized tax positions in interest expense and penalties in operating expenses, if appropriate. The tax year 2010 remains open to examination by the Internal Revenue Service and certain state taxing jurisdictions to which the Company is subject. The tax years 2008 and 2009 have been examined. Statement of Cash Flows: The statement of cash flows has been prepared using a definition of cash that includes deposits with original maturities of three months or less. We have reclassified certain cash flow items within the accompanying Consolidated Statements of Cash Flows and Notes to the Financial Statements for prior years in order to be comparable with the current presentation. These reclassifications had no effect on previously reported income. Earnings Per Share: Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding plus the dilutive effect of stock options. <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="62%" valign="bottom">   </td> <td width="2%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="5%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="5%" valign="bottom">   </td> <td width="7%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="5%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2011 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2010 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2009 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="8" valign="bottom"> (in thousands, except per share information) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Net (loss) income </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Net (loss) income, as reported </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (3,881 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> 8,053 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 5,285 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Basic (loss) earnings per share </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> As reported </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (0.56 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> 1.22 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 0.91 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Diluted (loss) earnings per share </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> As reported </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (0.56 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> 1.21 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 0.91 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> Stock Option Plans: We have an employee stock option plan under which we may grant options for up to 2,400,000 shares of common stock, which are reserved by the board of directors for issuance of stock options. The exercise price of each option is equal to the market price of our stock on the date of grant. The maximum term of the option is five years. We accounted for this plan based on FASB’s authoritative guidance entitled “Share-Based Payment”, using the modified prospective method. The impact of accounting for this plan under this guidance on our consolidated results of operations depends on the level of future option grants and the fair value of the options granted at such future dates, as well as the vesting periods provided by such awards. Existing outstanding options did not result in additional compensation expense upon adoption of this guidance since all outstanding options were fully vested. See also Note 14 – “Long Term Incentive Plan” in these Notes to Consolidated Financial Statements for additional information regarding the Long Term Incentive Plan. Following is a summary of stock option activity and number of shares reserved for outstanding options for the years ended December 31, 2011, 2010 and 2009: <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="33%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="9%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="9%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="9%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="9%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="9%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Number of Shares </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Weighted Average Exercise Price Per Share </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Exercise Price Per Share </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Maximum Remaining Term of Options Granted </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Weighted Average Grant Date Fair Value of Options </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Balance as of January 1, 2009 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Granted </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 90,000 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 4.23 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 4.23 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2.5 Years </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 1.05 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Balance as of December 31, 2009 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 90,000 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 4.23 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 4.23 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2.5 Years </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1.05 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Granted </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Balance as of December 31, 2010 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 90,000 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 4.23 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 4.23 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2.5 Years </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1.05 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Granted </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Balance as of December 31, 2011 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 90,000 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 4.23 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 4.23 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2.5 Years </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1.05 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> On January 6, 2010, the Board of Directors granted non-performance based stock awards of 25,500 shares to management at $6.39 per share. On January 11, 2010, we issued 18,000 shares and on February 11, 2010, we issued the remaining 7,500 shares of this grant. On June 8, 2010, we issued 30,000 shares of our stock granted on April 14, 2009 to management at a grant date fair value of $2.53 per share. On November 15, 2010, we issued 5,000 shares of our stock to management at $10.34 per share. In January 2011, we issued 60,000 shares of our stock granted on April 1, 2010 to management at a grant date fair value of $11.93 per share and 600 shares of our stock to consultants at $12.28 per share. Fair Value of Financial Instruments: We estimate the fair value of our financial instruments using relevant market information and other assumptions. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, prepayments and other factors. Changes in assumptions or market conditions could significantly affect these estimates. As of December 31, 2011, the estimated fair value of our financial instruments approximated book value. The fair value of our debt approximates its carrying value because the majority of our debt bears a floating rate of interest based on the LIBOR rate. There is no readily available market by which to determine fair market value of our fixed term debt; however, based on existing interest rates and prevailing rates as of each year end, we have determined that the fair value of our fixed rate debt approximates book value. We carry certain of our financial assets and liabilities at fair value on a recurring basis. These financial assets and liabilities are composed of trading account assets and various types of derivative instruments. In addition, we measure certain assets, such as goodwill and other long-lived assets, at fair value on a non-recurring basis to evaluate those assets for potential impairment. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with applicable accounting standards, we categorize our financial assets and liabilities into the following fair value hierarchy: Level 1 – Financial assets and liabilities with values based on unadjusted quoted prices for identical assets or liabilities in an active market. Examples of level 1 financial instruments include active exchange-traded equity securities and certain U.S. government securities. Level 2 – Financial assets and liabilities with values based on quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. Examples of level 2 financial instruments include commercial paper purchased from the State Street-administered asset-backed commercial paper conduits, various types of interest-rate derivative instruments, and various types of fixed-income investment securities. Pricing models are utilized to estimate fair value for certain financial assets and liabilities categorized in level 2. Level 3 – Financial assets and liabilities with values based on prices or valuation techniques that require inputs that are both unobservable in the market and significant to the overall fair value measurement. These inputs reflect management’s judgment about the assumptions that a market participant would use in pricing the asset or liability, and are based on the best available information, some of which is internally developed. Examples of level 3 financial instruments include certain corporate debt with little or no market activity and a resulting lack of price transparency. When determining the fair value measurements for financial assets and liabilities carried at fair value on a recurring basis, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability. When possible, we look to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, we look to market observable data for similar assets and liabilities. Nevertheless, certain assets and liabilities are not actively traded in observable markets, and we use alternative valuation techniques to derive fair value measurements. We use the fair value methodology outlined in the related accounting standard to value the assets and liabilities for cash, debt and derivatives. All of our cash is defined as Level 1 and all our debt and derivative contracts are defined as Level 2. In accordance with this guidance, the following table represents our fair value hierarchy for financial instruments, in thousands, at December 31, 2011 and December 31, 2010: <table border="0" cellspacing="0" cellpadding="0" width="90%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="50%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom"> 2011: </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Level 1 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Level 2 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Level 3 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Total </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Assets: </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Cash and cash equivalents </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 2,267 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 2,267 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Goodwill </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,840 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,840 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Net intangible assets </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 5,025 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 5,025 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Liabilities </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Long term debt </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (28,509 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (28,509 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Derivative contract </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (484 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (484 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> 2010: </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> Level 1 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> Level 2 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> Level 3 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> Total </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Assets: </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Cash and cash equivalents </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 2,468 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 2,468 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Goodwill </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,840 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,840 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Net intangible assets </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 5,775 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 5,775 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Liabilities </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Long term debt </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (45,447 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (45,447 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Derivative contract </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (650 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (650 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> </tr> </table> We have had no transfers in or out of Levels 1 or 2 fair value measurements. Other than standard amortization of intangible assets, we have had no activity in Level 3 fair value measurements for the year ending December 31, 2011. For Level 3 assets, goodwill of $6.8 million is subject to impairment analysis each year end under Phase I of the ASC guidance. We use an annual capitalized earnings computation to evaluate Level 3 assets for impairment. No impairment was recorded as of December 31, 2011, as determined by a third party evaluation. See also Note 13 –“Purchase of Inventory, Fixed Assets, and Intangible Assets of Venture Metals, LLC” for additional information on the third party valuation. Subsequent Events: We have evaluated the period from December 31, 2011 through the date the financial statements herein were issued, for subsequent events requiring recognition or disclosure in the financial statements and we identified the following events: Second Amendment to Consulting Agreement with K&R, LLC: Effective January 1, 2012, the Company and K&R, LLC entered into a Second Amendment to Consulting Agreement (“the Second Amendment”), which amends an April 1, 2010 amendment (the “Amendment”) to a consulting agreement which the parties had entered into effective January 2, 1998 (the “Prior Agreement”). Under the Prior Agreement, the Company engaged K&R as a consultant and retained the services of K&R management personnel to perform planning and consulting services with respect to the Company's businesses, including the preparation of business plans, pro forma budgets, and assistance with general operational issues. The Amendment increased the consulting fees from $240.0 thousand per annum to $480.0 thousand per annum. The Second Amendment reduces the consulting fees from $480.0 thousand per annum to $240.0 thousand per annum. The annual fee is payable in equal monthly installments of $20.0 thousand. The Second Amendment otherwise ratifies the Prior Agreement in all respects. See also Note 6 –“Related Party Transactions” for additional information relating to the Prior Agreement and the Second Amendment. Third Amendment to Credit Agreement with Fifth Third Bank: On March 2, 2012, Industrial Services of America, Inc. and ISA Indiana, Inc. (the “Companies”) entered into a Third Amendment to Credit Agreement (the “Third Amendment”) with Fifth Third Bank (the “Bank”) which amended the July 30, 2010 Credit Agreement, including the First Amendment to Credit Agreement dated as of April 14, 2011 and the Second Amendment to Credit Agreement dated as of November 16, 2011, as follows. The Third Amendment redefines the calculation period for the purpose of measuring compliance with our covenants to maintain a ratio of debt to adjusted EBITDA (the “Senior Leverage Ratio”) and a ratio of adjusted EBITDA to aggregate cash payments of interest expense and scheduled payment of principal of not more than 1.20 to 1 (the “Fixed Charge Coverage Ratio”) such that each ratio will be calculated quarterly for the period beginning January 1, 2012 through the end of each quarter of 2012. Prior to the Third Amendment, the ratios were calculated on a rolling 12 month basis. The Third Amendment also changed the Senior Leverage Ratio from 3.5 to 1 in the original Credit Agreement to (i) 4.25 to 1 in the first quarter of 2012, (ii) 3.50 to 1 in the second and third quarter of 2012, and (iii) 3.25 to 1 in the fourth quarter of 2012 and thereafter. The Third Amendment also increased the unused line fee by 0.25% to 0.75% and provided a waiver of the Senior Leverage Ratio and Fixed Charge Coverage Ratio covenant defaults for the quarter ending December 31, 2011. In addition, the Companies also agreed to perform other customary commitments and pay a fee of $10.0 thousand to the Bank. See Note 3 – “Notes Payable to Bank” for additional details relating to this amendment. Amendment of Articles of Incorporation: On February 29, 2012, the Company amended its Articles of Incorporation to change the par value of its common stock to $0.0033 per share. Impact of Recently Issued Accounting Standards: In September 2011, the FASB issued ASU No. 2011-08, an amendment to Topic 350, Intangibles—Goodwill and Other, which simplifies how entities test goodwill for impairment. Previous guidance under Topic 350 required an entity to test goodwill for impairment using a two-step process on at least an annual basis. First, the fair value of a reporting unit was calculated and compared to its carrying amount, including goodwill. Second, if the fair value of a reporting unit was less than its carrying amount, the amount of impairment loss, if any, was required to be measured. Under the amendments in this update, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads the entity to determine that it is more likely than not that its fair value is less than its carrying amount. If after assessing the totality of events or circumstances, an entity determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is unnecessary. If the entity concludes otherwise, then it is required to test goodwill for impairment under the two-step process as described under paragraphs 350-20-35-4 and 350-20-35-9 under Topic 350. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, the quarter ending March 31, 2012 for us, and early adoption is permitted. We do not expect the adoption of ASU 2011-08 will have a material impact on our Condensed Consolidated Financial Statements. In June 2011, the FASB issued ASU 2011-05, which is an update to Topic 220, “Comprehensive Income”. This update eliminates the option of presenting the components of other comprehensive income as part of the statement of changes in stockholders’ equity, requires consecutive presentation of the statement of net income and other comprehensive income and requires reclassification adjustments from other comprehensive income to net income to be shown on the financial statements. ASU 2011-05 is effective for all interim and annual reporting periods beginning after December 15, 2011, the quarter ending March 31, 2012 for us. However, ASU 2011-12 has deferred the specific requirement within ASU 2011-05 to present on the face of the financial statements items that are reclassified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income. Entities should continue to report reclassifications out of accumulated comprehensive income consistent with the presentation requirements in effect before ASU 2011-05. We do not expect a material impact on our financials due to the implementation of this guidance. As ASU No. 2011-05 relates only to the presentation of Comprehensive Income, the Company does not expect the adoption of this update will have a material effect on its consolidated financial statements. In May 2011, the FASB issued ASU No. 2011-04, which is an update to Topic 820, “Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). The amendments in this ASU generally represent clarification of Topic 820, but also include instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRS. The amendments are effective for interim and annual periods beginning after December 15, 2011, the quarter ending March 31, 2012 for us, and are to be applied prospectively. Early application is not permitted. We do not expect the adoption of ASU 2011-04 will have a material impact on our Condensed Consolidated Financial Statements.

NOTE 2 – STOCK DIVIDEND On May 3, 2010, the Board of Directors declared a 3-for-2 stock split effected by a 50% stock dividend. The stock dividend was issued to holders of record as of May 17, 2010, and paid June 1, 2010. All share prices in these Notes have been adjusted to reflect the impact of this stock split.

NOTE 3 - NOTES PAYABLE TO BANK On March 2, 2012, Industrial Services of America, Inc. and ISA Indiana, Inc. (the “Companies”) entered into a Third Amendment to Credit Agreement (the “Third Amendment”) with Fifth Third Bank (the “Bank”) which amended the July 30, 2010 Credit Agreement (the “Credit Agreement”), including the First Amendment to Credit Agreement dated as of April 14, 2011 (the “April Amendment”) and the Second Amendment to Credit Agreement dated as of November 16, 2011 (the “November Amendment”), as follows. The Third Amendment redefines the calculation period for the purpose of measuring compliance with our covenant to maintain a ratio of debt to adjusted EBITDA (the “Senior Leverage Ratio”) and a ratio of adjusted EBITDA to aggregate cash payments of interest expense and scheduled payment of principal of not more than 1.20 to 1 (the “Fixed Charge Coverage Ratio”) such that each ratio will be calculated quarterly for the period beginning January 1, 2012 through the end of each quarter of 2012. Prior to the Third Amendment, the ratios were calculated on a rolling 12 month basis. The Third Amendment also changed the Senior Leverage Ratio from 3.5 to 1 in the original Credit Agreement to (i) 4.25 to 1 in the first quarter of 2012, (ii) 3.50 to 1 in the second and third quarter of 2012, and (iii) 3.25 to 1 in the fourth quarter of 2012 and thereafter. The Third Amendment also increased the unused line fee by 0.25% to 0.75% and provided a waiver of the Senior Leverage Ratio and Fixed Charge Coverage Ratio covenant defaults for the quarter ending December 31, 2011, as discussed below. In addition, the Companies also agreed to perform other customary commitments and pay a fee of $10.0 thousand to the Bank. On April 14, 2011, we entered into the April Amendment with the Bank which amends the Credit Agreement as follows: The April Amendment (i) increased the maximum revolving commitment and the maximum amount of eligible inventory advances in the calculation of the borrowing base, (ii) changed the due date of the first excess cash flow payment to April 30, 2012, and (iii) amended certain other provisions of the Credit Agreement and certain of the other loan documents. On December 6, 2011, we entered into the November Amendment with the Bank which amends the Credit Agreement, as amended by the April Amendment described above. Under the April Amendment, the Company was permitted to borrow the lesser of $45.0 million (the “Maximum Revolving Commitment”) or the borrowing base, consisting of the sum of 85% of eligible accounts plus 60% of eligible inventory up to $18.0 million. Under the November Amendment, the Maximum Revolving Commitment was reduced to $40.0 million. In addition, the Company agreed to perform other customary commitments. Under the original Credit Agreement, we were permitted to borrow via a revolving credit facility the lesser of $40.0 million or the borrowing base, consisting of the sum of 85% of eligible accounts plus 60% of eligible inventory up to $17.0 million. Eligible accounts are generally those receivables that are less than 90 days from the invoice date. As security for the revolving credit facility, we provided the Bank a first priority security interest in the accounts receivable from most of our customers and in our inventory. We also cross collateralized the revolving line of credit with an $8.8 million term loan, entered into to replace several notes payable with another bank. Proceeds of the original revolving credit facility in the amount of $33.4 million were used to repay the outstanding principal balance of the prior obligations with another bank. We used additional proceeds of the revolving credit facility to pay closing costs and for funding temporary fluctuations in accounts receivable of most of our customers and inventory. With respect to the revolving credit facility, the interest rate is one month LIBOR plus two hundred fifty basis points (2.50%) per annum, adjusted monthly on the first day of each month. As of December 31, 2011, the interest rate was 3.125%. We also paid a fee of 0.50% on the unused portion. The revolving credit facility expires on July 31, 2013. As of December 31, 2011, the outstanding balance on the revolving line of credit was $20.1 million. The $8.8 million term loan provides for an interest rate that is the same as the interest rate for the revolving credit facility. Principal and interest is payable monthly in consecutive equal installments of $105.0 thousand. The first such payment commenced September 1, 2010 and the final payment of the then-unpaid balance becomes due and payable in full on July 31, 2013. In addition, beginning April 30, 2012 (or, if earlier, upon completion of the Company’s financial statements for the fiscal year ending December 31, 2011), we will make an annual payment equal to 25% of (i) our adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”), minus (ii) our aggregate cash payments of interest expense and scheduled payments of principal (including any prepayments of the term loan), minus (iii) any non-financed capital expenditures, in each case for the Company’s prior fiscal year. Any such payments will be applied to remaining installments of principal under the term loan in the inverse order of maturity, and to accrued but unpaid interest thereon. As security for the term loan, we provided the Bank a first priority security interest in all equipment other than the rental fleet that we own. As of December 31, 2011, the outstanding balance on the term loan was $7.0 million. In addition, we provided a first mortgage on the property at the following locations: 3409 Campground Road, 6709, 7023, 7025, 7101, 7103, 7110, 7124, 7200 and 7210 Grade Lane, Louisville Kentucky, 1565 East Fourth Street, Seymour, Indiana and 1617 State Road 111, New Albany, Indiana. The Company also cross collateralized the term loan with the revolving credit facility and all other existing debt the Company owes to the Bank. In our Credit Agreement with the Bank, we agreed to certain covenants, including (i) maintenance of a ratio of debt to adjusted EBITDA for the preceding 12 months of not more than 3.5 to 1 (or, if measured as of December 31 of any fiscal year, 4.0 to 1), (ii) maintenance of a ratio of adjusted EBITDA for the preceding twelve months to aggregate cash payments of interest expense and scheduled payment of principal in the preceding 12 months of not less than 1.20 to 1, and (iii) a limitation on capital expenditures of $4.0 million in any fiscal year. As of December 31, 2011, we were not in compliance with the covenants in (i) and (ii) above due to decreased sales relating to decreased demand in stainless steel in the last three quarters of the year. As of December 31, 2011, our ratio of debt to adjusted EBITDA was 9.31; our ratio of adjusted EBITDA to aggregate cash payments of interest expense and scheduled principal payments was (0.70), and our capital expenditures totaled $2.5 million, which includes $36.6 thousand in deposits on equipment. In connection with the Third Amendment, we received a waiver from the Bank for the year ending December 31, 2011 for failing to meet the ratio requirements for covenants (i) and (ii) above. Pursuant to the Third Amendment, the Senior Leverage Ratio will increase to 4.25 to 1 for the period ending March 31, 2012. The Senior Leverage Ratio will then decrease to 3.5 to 1 for the periods ending June 30 and September 30, 2012 and decrease to 3.25 to 1 for the period ending December 31, 2012 and thereafter. The other covenants will remain the same going forward. As of December 31, 2011, we have $19.9 million under our existing credit facilities that we can use based on the bank waiver received. On April 12, 2011, we entered into a Loan and Security Agreement with Fifth Third Bank (the “Bank”) pursuant to which the Bank agreed to provide the Company with a Promissory Note (the “Note”) in the amount of $226.9 thousand for the purpose of purchasing operating equipment. The interest rate is five and 68/100 percent (5.68%). Principal and interest is payable in 48 equal monthly installments of $5.3 thousand, each due on the 20th day of each calendar month. Payment commenced on the 20th day of May, 2011, and the entire unpaid principal amount, together with all accrued and unpaid interest, charges, fees or other advances, if any, comes due on or before April 20, 2015. As security for the Note, we have granted the Bank a first priority security interest in the equipment purchased with the proceeds of the Note. As of December 31, 2011, the outstanding balance of this loan was $187.1 thousand. On August 9, 2011, we entered into a Loan and Security Agreement (the “August Agreement”) with the Bank pursuant to which the Bank agreed to loan the Company funds pursuant to a Promissory Note (the “August Note”) in the amount of $115.0 thousand for the purpose of purchasing operating equipment. The interest rate is 5.95%. Principal and interest is payable in 48 equal monthly installments of $2.7 thousand. The first such payment commenced on September 12, 2011, and the entire unpaid principal amount, together with all accrued and unpaid interest, charges, fees or other advances, if any, becomes due no later than August 12, 2015. As security for the August Note, we have granted the Bank a first priority security interest in the equipment purchased with the proceeds of the Note. As of December 31, 2011, the outstanding balance of this loan was $106.4 thousand. On October 19, 2010, we entered into a Promissory Note (the “October Note”) with the Bank in the amount of $1.3 million for the purpose of purchasing equipment. The interest rate is equal to five and 20/100 percent (5.20%) per annum. Principal and interest is payable monthly in consecutive equal installments of $30.5 thousand with the first such payment commencing November 15, 2010, and the final unpaid principal amount due, together with all accrued and unpaid interest, charges, fees, or other advances, if any, to be paid on October 15, 2014. As security for the October Note, we provided Fifth Third Bank a first priority security interest in the equipment purchased with the proceeds. As of December 31, 2011, the outstanding balance on the Note was $962.4 thousand. On August 2, 2007, we entered into an asset purchase agreement for $1.3 million funded primarily by a note payable to ILS, the sole member of which is Brian Donaghy, our president and chief operating officer, whereby we pay $20.0 thousand per month for 60 months for various assets including tractor trailers, trucks and containers. The note payable reflects a seven percent (7.0%) interest payment on the outstanding balance plus principal amortization. We also paid ILS $100.0 thousand cash as a portion of the purchase price at the time of execution of the asset purchase agreement. We recorded a note payable of $1.0 million with an outstanding balance at December 31, 2011 of $155.9 thousand. We entered into three interest rate swap agreements swapping variable rates for fixed rates. The first swap agreement covers approximately $4.7 million in debt and commenced April 7, 2009 and matures on April 7, 2014. The second swap agreement covers approximately $2.1 million in debt and commenced October 15, 2008 and matures on May 7, 2013. The third swap agreement covers approximately $457.5 thousand in debt and commenced October 22, 2008 and matures on October 22, 2013. The three swap agreements fix our interest rate at approximately 5.8%. At December 31, 2011, we recorded the estimated fair value of the liability related to the three swaps at approximately $484.2 thousand. We entered into the swap agreements for the purpose of hedging the interest rate market risk for the respective notional amounts. These swap agreements were not affected by the debt restructuring with the Bank. We maintain a cash account on deposit with BB&T which serves as collateral for the swap agreements. See Note 1 – “Summary of Significant Accounting Policies – Derivative and Hedging Activities” for additional information about these derivative instruments. The following table outlines the notional amounts, in thousands, related to the interest rate swaps as of December 31, 2011: <table border="0" cellspacing="0" cellpadding="0" width="20%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="1%" valign="bottom">   </td> <td width="11%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td colspan="2" valign="bottom"> Notional Amount </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Rate </td> <td valign="bottom">   </td> </tr> <tr> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 4,730 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 5.89 </td> <td valign="bottom" style="background-color: #E5FFFF;"> % </td> </tr> <tr> <td valign="bottom"> $ </td> <td valign="bottom"> 2,099 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 5.65 </td> <td valign="bottom"> % </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 457 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 5.89 </td> <td valign="bottom" style="background-color: #E5FFFF;"> % </td> </tr> </table> Our long term debt as of December 31, 2011 and December 31, 2010 consisted of the following: <table border="0" cellspacing="0" cellpadding="0" width="96%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="74%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2011 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2010 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="5" valign="bottom"> (in thousands) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Revolving credit facility of $40.0 million with Fifth Third Bank. See above description for additional details. </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 20,083 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 35,489 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Note payable to Fifth Third Bank in the amount of $8.8 million secured by our rental fleet equipment, our shredder system assets, and a crane. See above description for additional details. </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 7,015 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 8,275 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Note payable to Fifth Third Bank in the amount of $1.3 million secured by equipment purchased with the proceeds. See above description for additional details. </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 962 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,271 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Loan and Security Agreement payable to Fifth Third Bank in the amount of $227 thousand secured by the equipment purchased with the proceeds. See above description for additional details. </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 187 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Note payable to Fifth Third Bank in the amount of $115 thousand secured by the equipment purchased with the proceeds. See above description for additional details. </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 106 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Note payable to Paccar Financial Corp. in the amount of $164 thousand secured by one Kenworth truck. Payments are $1,697.68 per month with an effective interest rate of 6.5%. The maturity date under this agreement is September 2011. </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 36 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Note payable to ILS for various assets including tractor trailers, trucks and containers. The repayment terms are $20,000 per month for 60 months at a seven percent (7.0%) interest rate. The maturity date under this agreement is August 2012. </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 156 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 376 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 28,509 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 45,447 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Less current maturities </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,821 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,824 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 26,688 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 43,623 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> The annual maturities of long term debt, in thousands, as of December 31, 2011 are as follows: <table border="0" cellspacing="0" cellpadding="0" width="37%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="64%" valign="bottom">   </td> <td width="7%" valign="bottom">   </td> <td width="2%" valign="bottom">   </td> <td width="21%" valign="bottom">   </td> <td width="4%" valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> 2012 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,821 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> 2013 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 26,264 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> 2014 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 388 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> 2015 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 36 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Thereafter </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Total </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 28,509 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table>

NOTE 4 - INCOME TAXES The income tax provision (benefit), in thousands, consists of the following for the years ended December 31, 2011, 2010 and 2009: <table border="0" cellspacing="0" cellpadding="0" width="90%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="62%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2011 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2010 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2009 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Federal </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Current </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (3,373 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> 3,556 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 364 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Deferred </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 436 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 54 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,563 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> IRS Audit Adjustment </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 622 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (2,315 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 3,610 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,927 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> State </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Current </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (818 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 884 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 466 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Refundable state recycle tax credits </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (185 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Deferred </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 92 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 64 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 108 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (726 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> 763 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 574 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> (3,041 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 4,373 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 3,501 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> A reconciliation of income taxes at the statutory rate to the reported provision, in thousands, is as follows: <table border="0" cellspacing="0" cellpadding="0" width="90%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="62%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2011 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2010 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2009 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Federal income tax at statutory rate </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> (2,468 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 4,225 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,987 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> State and local income taxes, net of federal income tax effect </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (395 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> 599 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 398 </td> <td valign="bottom">   </td> </tr> <tr style="background-color: #E5FFFF;"> <td valign="bottom"> Permanent differences </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 13 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (156 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> 7 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Other differences </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (191 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (295 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> 109 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr style="background-color: #E5FFFF;"> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (3,041 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> 4,373 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 3,501 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> Significant components of the Company’s deferred tax liabilities and assets, in thousands, as of December 31, 2011 and 2010 are as follows: <table border="0" cellspacing="0" cellpadding="0" width="78%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="67%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="10%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="10%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2011 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2010 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Deferred tax liabilities </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Tax depreciation in excess of book </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (3,505 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> (3,402 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Tax amortization in excess of book </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (212 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (310 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Gross deferred tax liabilities </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (3,717 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (3,712 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Deferred tax assets </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Property taxes </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 12 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 43 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Allowance for doubtful accounts </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 43 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 43 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Book amortization in excess of tax </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 29 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 58 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Inventory capitalization </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 217 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 250 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Reserve for CWS </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 129 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 129 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Bonuses </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 466 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Interest rate swap </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 194 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 280 </td> <td valign="bottom">   </td> </tr> <tr style="background-color: #E5FFFF;"> <td valign="bottom"> Other </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 98 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 12 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Gross deferred tax assets </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 722 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,281 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr style="background-color: #E5FFFF;"> <td valign="bottom"> Net deferred tax liabilities </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (2,995 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> (2,431 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> The Internal Revenue Service has conducted an examination of the Company’s 2009 income tax return and, per the final report, has proposed changes amounting to approximately $735.0 thousand of additional taxes due for which we expect to receive an invoice early in 2012. This increase arose from the Company’s use of bonus depreciation rules for certain additions to shredding equipment which were determined to be disqualified for bonus depreciation. This additional income tax has been accrued as of December 31, 2011. This resulting adjustment to 2009 depreciation deductions allowed the Company to file an amended U.S. tax return for 2010, pursuant to which we claim additional depreciation deductions and resulted in a claim for refund of income taxes paid amounting to approximately $113.0 thousand which has also been accrued at December 31, 2011. We use the deferral method of accounting for the available state tax credits relating to the purchase of the shredder equipment. On December 31, 2010, we had deferred recycling equipment state tax credit carryforwards of $4.2 million relating to this purchase which do not expire. This tax credit is limited to 25 percent of our state income tax liability. Due to the net loss in 2011, there was no available state tax credit in 2011. We used the available credit of $185.1 thousand in 2010.

NOTE 5 - SALES-TYPE LEASES The Company is the lessor of equipment under sales-type lease agreements having terms of three years, with the lessees having the option to acquire the equipment at the termination of the leases. All costs associated with this equipment are the responsibility of the lessees. Future lease payments receivable under sales-type leases, in thousands, at December 31, 2011 are as follows: <table border="0" cellspacing="0" cellpadding="0" width="75%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="82%" valign="bottom">   </td> <td width="4%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="10%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> 2012 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 44 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Thereafter </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Minimum lease payments receivable </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 44 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Less unearned income </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (4 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Net investment in sales-type leases </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 40 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Less current portion </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (40 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table>

NOTE 6 - RELATED PARTY TRANSACTIONS The Company enters into various transactions with related parties including the Company’s principal shareholder and an affiliated company owned by the Company’s principal shareholder (K&R). A summary of these transactions, in thousands, is as follows: <table border="0" cellspacing="0" cellpadding="0" width="90%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="57%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2011 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2010 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2009 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Balance sheet accounts: </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Notes receivable </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 45.4 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 88.4 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 129.1 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Deposits (included in other long-term assets) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 62.1 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 62.1 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 62.1 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Income statement activity: </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Rent expense (property) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 582.0 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 582.0 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 582.0 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Lease expense (equipment) </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 101.0 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 5.5 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Consulting fees </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 480.0 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 420.0 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 240.0 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> ISA leases its corporate offices, processing property and buildings in Louisville, Kentucky for $48.5 thousand per month from K&R pursuant to the K&R Lease. Deposits include one month of the original lease agreement’s rent in advance in the amount of $42.1 thousand. In 2004, we paid for repairs totaling $302.2 thousand that we made to the buildings and property that we lease from K&R, located at 7100 Grade Lane, Louisville, Kentucky. K&R executed an unsecured promissory note, dated March 25, 2005, but effective December 31, 2004, to us for the principal sum of $302.2 thousand. In January 2006, K&R began making payments on the promissory note of principal only in ninety-six (96) monthly installments of $3.1 thousand each. Failure of K&R to make any payment when due under this note within fifteen (15) days of its due date shall constitute a default. After the fifteen day period, the note shall bear interest at a rate equal to fifteen percent (15.0%) per annum and we have the right to exercise our remedies to collect full payment of the note. In an addendum to the K&R lease as of January 1, 2006, the rent was increased $4.0 thousand as a result of the improvements made to the property in 2004. For years 2011, 2010, and 2009, the payments to K&R by the Company of $4.0 thousand for additional rent and the payment from K&R to the Company of $3.9 thousand for the promissory note were offset. Effective January 1, 2012, the Company and K&R entered into an agreement (the “Second Amendment”) which amends an April 1, 2010 amendment (the “Amendment) to a consulting agreement which the parties had entered into effective January 2, 1998 (the “Prior Agreement”). Under the Prior Agreement, the Company engaged K&R as a consultant and retained the services of K&R management personnel to perform planning and consulting services with respect to the Company’s businesses, including the preparation of business plans, pro forma budgets, and assistance with general operational issues. The Prior Agreement provided for a term of ten years, with an automatic renewal for additional terms of one year on January 1 of each successive calendar year unless either party provides the other party with written notice of its intent not to renew at least six months prior to the expiration of the then existing term. The Company’s Chief Executive Officer, Harry Kletter, is a member of Kletter Holding, LLC, which is the sole member of K&R. The Amendment increased the consulting fees from $240.0 thousand per annum to $480.0 thousand per annum. The Second Amendment reduces the consulting fees from $480.0 thousand per annum to $240.0 thousand per annum. The annual fee is payable in equal monthly installments of $20.0 thousand. The Second Amendment otherwise ratifies the Prior Agreement in all respects. Deposits include one month of the original agreement’s consulting services in advance in the amount of $20.0 thousand. Our Chairman is compensated through these consulting fees. In 2011, we extended this consulting agreement for one year according to the terms of the contract. Effective December 1, 2010, the Company and K&R entered into a lease agreement, under which the Company leases equipment from K&R for a monthly payment of $5.5 thousand for 5 years. Effective June 1, 2011, the Company and K&R entered into a lease agreement, under which the Company leases equipment from K&R for a monthly payment of $5.0 thousand for 5 years. Other related-party transactions are as follows: Amendment to Brian Donaghy’s employment agreement: Effective April 1, 2010, the Company amended and restated the employment agreement of Brian Donaghy (“Mr. Donaghy”), the Company’s President and Chief Operating Officer, to (a) extend the term to June 30, 2015, and (b) provide for (i) an annual bonus based on the Company’s achievement of certain return on net asset (“RONA”) targets pursuant to incentive plans to be established by the Company, to be payable in cash or partly in Common Stock at the election of Mr. Donaghy, (ii) a bonus of up to 15,000 shares of Common Stock per annum based on the Company’s achievement of certain RONA targets, and (iii) a one-time bonus of up to 225,000 shares of Common Stock based on the Company’s achievement of certain 5 year RONA targets as measured on December 31, 2014. Purchase of Venture Metals, LLC Intangibles: On March 26, 2010, we entered into an agreement dated July 1, 2010, subject to shareholder approval of certain issuances of shares of our common stock. After shareholder approval of the issuance of 300,000 shares of our common stock, on July 1, 2010, we entered into an asset purchase agreement and a non-compete agreement with Venture Metals, LLC (“Venture”), 3409 Camp Ground Road, Louisville, KY 40211. Pursuant to the asset purchase agreement dated July 1, 2010, in consideration for the transfer of the Venture name and entry into the Non-Compete Agreement, we delivered to Venture 300,000 shares of our common stock based on a price of $10.41 per share (the “Purchase Price”) based on the stock price on July 1, 2010. The purchase price was negotiated between us and Steve Jones, former co-owner of Venture. Venture was owned by Steve Jones and Jeff Valentine, both of whom were our employees at the time. At the same time as these negotiations took place, we renegotiated all management contracts and employment agreements, including those of Mr. Jones and Mr. Valentine. Mr. Jones’ and Mr. Valentine’s original employment agreements were entered into in connection with our prior purchase of assets from Venture. An outside financial consultant also assessed the transaction to provide an opinion of the fair value of the transaction, which led to a supplemental acquisition dated July 1, 2010, as described below. On June 16, 2010, the Company and Venture agreed to a supplemental acquisition dated effective July 1, 2010. Pursuant to an understanding memorialized by this agreement, on April 12, 2010, the Company paid Venture $1.3 million commissions earned and accrued in 2009 using the line of credit facility and on July 1, 2010, issued to Venture 300,000 shares of Common Stock, in exchange for Venture’s customer list, the Venture name, Venture’s execution of a non-compete agreement, and Venture’s agreement to cause Mr. Jones and Mr. Valentine to provide the company with non-compete agreements. Based on an independent appraisal, the Company agreed to deliver up to an additional 750,000 shares of ISA Common Stock in accordance with certain terms. The Company obtained a valuation of Venture’s intangible assets from an outside source. Based on preliminary estimates, we recorded additional goodwill of $4.3 million and decreased the intangible asset by $630.0 thousand as of December 31, 2010. No changes were made to recorded amounts for goodwill or the other amortized intangible items based on this valuation, which was finalized in the second quarter of 2011. Based on a third party review, no impairment was recorded to goodwill as of December 31, 2011. See Note 13 – “Purchase of Inventory, Fixed Assets, and Intangibles of Venture Metals, LLC” for the material terms of the Non-Compete Agreement and supplemental acquisition details and for additional information relating to the third party valuations performed. Donaghy Asset Purchase Agreement: During 2007, we entered into an asset purchase agreement for $1.8 million funded primarily by a note payable to Industrial Logistic Services, LLC, the sole member of which is Brian Donaghy, our president and chief operating officer, whereby we pay $20.0 thousand per month for 60 months for various assets including tractor trailers, trucks and containers. The note payable reflects a seven percent (7.0%) interest payment on the outstanding balance plus principal amortization. During 2011 and 2010, we made payments on this note of $240.0 thousand. The outstanding balance at December 31, 2011 was $155.9 thousand.

NOTE 7 - EMPLOYEE RETIREMENT PLAN We maintain a defined contribution retirement plan under Section 401(k) of the Internal Revenue Code which covers substantially all employees. Eligible employees may contribute a maximum of 15.0% of their annual salary. Under the plan, we match 25.0% of each employee’s voluntary contribution up to 6.0% of their gross salary. The expense under the plan for 2011, 2010 and 2009 was $59.6 thousand, $56.5 thousand, and $48.6 thousand, respectively.

NOTE 8 - LEASE COMMITMENTS Operating Leases: We lease our Louisville, Kentucky facility from a related party (see Note 6) under an operating lease expiring December 2012. The rent was adjusted in January 2008 per the agreement to monthly payments of $48.5 thousand through December 2012. In addition, the Company is also responsible for real estate taxes, insurance, utilities and maintenance expense. We lease equipment from a related party (see Note 6) under operating leases expiring November 2015 and May 2016. We lease a facility in Dallas, Texas for management services operations. The agreement provided that monthly payments of $2.5 thousand were paid through September 2006. The lease was renewed effective October 1, 2011 for a one-year period with monthly payments of $1.0 thousand. We leased a facility in Lexington, Kentucky for $4.5 thousand per month; the lease terminated February 10, 2012. We subleased this property for a term commencing March 1, 2007 and ending January 31, 2012 for $4.5 thousand per month.           Future minimum lease payments for operating leases, in thousands, as of December 31, 2011 are as follows: <table align="center" border="0" cellspacing="0" cellpadding="0" width="60%"> <tr style="FONT-SIZE:1PX"> <td width="77%" valign="bottom">   </td> <td width="4%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="13%" valign="bottom">   </td> <td width="2%" valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> 2012 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 721.2 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> 2013 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 126.0 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> 2014 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 126.0 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> 2015 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 126.0 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> 2016 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 25.5 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Thereafter </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Future minimum lease payments </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,124.7 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> Total rent expense for the years ended December 31, 2011, 2010 and 2009 was $1.0 million, $968.9 thousand, and $1.1 million, respectively. Capital Leases: We made the final payments for the equipment under capital leases in June 2010. We now own the equipment and no longer have any equipment under capital leases.

NOTE 9 - CASH DIVIDEND In 2011 and 2010, the Board of Directors did not declare a cash dividend.

NOTE 10 – PER SHARE DATA The computation for basic and diluted earnings per share is as follows: <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="65%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="7%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="7%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="7%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2011 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2010 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2009 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="8" valign="bottom"> (in thousands, except per share information) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Basic earnings per share </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Net (loss) income </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (3,881 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> 8,053 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 5,285 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Weighted average shares outstanding </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,927 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,622 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 5,783 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Basic (loss) earnings per share </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (0.56 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> 1.22 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 0.91 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Diluted earnings per share </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Net (loss) income </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (3,881 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> 8,053 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 5,285 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Weighted average shares outstanding </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,927 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,622 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 5,783 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Add dilutive effect of assumed exercising of stock options </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 44 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 18 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Diluted weighted average shares outstanding </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,927 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,666 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 5,801 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Diluted (loss) earnings per share </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (0.56 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> 1.21 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 0.91 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table>

NOTE 11 - LEGAL PROCEEDINGS On January 4, 2007, Lennox Industries, Inc., a commercial heating and air-conditioning manufacturer, filed a suit against us captioned Lennox Industries, Inc. v. Industrial Services of America, Inc., Case No. CV-2007-004, in the Arkansas County, Arkansas Circuit Court in Stuttgart, Arkansas. Lennox in its Second Amended Complaint alleged breach of contract, negligence, and breach of fiduciary duty arising from our alleged miscategorization of Lennox’s scrap metal and mismanagement of the scrap metal recycling operations at three Lennox plants during the contract period April 18, 2001 through termination on November 17, 2005. Both compensatory and punitive damages were sought by Lennox. A jury trial was held from June 20-24, 2011. The punitive damage claim was withdrawn by Lennox at the conclusion of its case, and Lennox claimed over $1.0 million in compensatory damages. On June 24, the jury found in ISA’s favor on five of the six claims. Lennox was awarded $175.0 thousand on the remaining claim. Following the trial, both Lennox and ISA filed motions with the court seeking an award of attorney fees against each other. Lennox also filed a motion requesting an award of pre-judgment interest on the $175.0 thousand verdict. The Court denied both of Lennox’s motions and granted ISA’s motion for attorney fees in the amount of $98.0 thousand against Lennox. No appeal was taken by either party, and a Mutual General Release was signed as part of a final negotiated settlement in which Lennox received $84.5 thousand. A Satisfaction of Judgment was filed with the court on December 28, 2011, and the case is closed. We have litigation from time to time, including employment-related claims, none of which we currently believe to be material.

NOTE 12 - SEGMENT INFORMATION The Company’s operations include two primary segments: Recycling and Waste Services. In prior years, our three primary segments were ISA Recycling, Computerized Waste Systems (CWS), and Waste Equipment Sales & Service (WESSCO). In the first quarter of 2009, we decided to consolidate CWS and WESSCO into one reporting segment because CWS revenues have declined so that this segment is no longer material to our total revenues. We named this combined segment Waste Services because it more accurately reflects that business. Waste Services provides waste disposal services including contract negotiations with service providers, centralized billing, invoice auditing, and centralized dispatching. Waste Services also sells, leases, and services waste handling and recycling equipment. The Recycling segment provides products and services to meet the needs of its customers related to ferrous, non-ferrous and fiber recycling in two locations in the Midwest. The Company’s two reportable segments are determined by the products and services that each offers. The Recycling segment generates its revenues based on buying and selling of ferrous, non-ferrous, including stainless steel, and fiber scrap. Waste Services’ revenues consist of charges to customers for waste disposal services and equipment sales and lease income. The components of the column labeled “other” are selling, general and administrative expenses that are not directly related to the two primary segments. The accounting policies of the two segments are the same as those described in the summary of significant accounting policies (Note 1). We evaluate segment performance based on gross profit or loss and the evaluation process for each segment includes only direct expenses and selling, general and administrative costs, omitting any other income and expense and income taxes. <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="50%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom"> 2011 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> RECYCLING </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> WASTE SERVICES </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> OTHER </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> SEGMENT TOTALS </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="11" valign="bottom"> (in thousands) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Recycling revenues </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 269,459 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 269,459 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Equipment sales, service and leasing revenues </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,132 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,132 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Management fees </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 5,279 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 5,279 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Cost of goods sold </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (259,692 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (5,474 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (265,166 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Inventory adjustment for lower of cost or market </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (3,441 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (3,441 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> </tr> <tr> <td valign="bottom"> Selling, general, and administrative expenses </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (8,137 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (808 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (3,775 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (12,720 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Segment (loss) profit </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> (1,811 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,129 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> (3,775 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> (4,457 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="50%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom"> 2011 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> RECYCLING </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> WASTE SERVICES </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> OTHER </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> SEGMENT TOTALS </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="11" valign="bottom"> (in thousands) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Cash </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,116 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,151 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,267 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Income tax receivable </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 3,967 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 3,967 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Accounts receivable, net </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 16,342 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 940 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (91 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 17,191 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Inventories </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 18,500 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 44 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 18,544 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Net property and equipment </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 18,909 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,024 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,266 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 26,199 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Goodwill </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 6,840 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 6,840 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Net intangibles </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 5,025 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 5,025 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Other assets </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 363 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 12 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 562 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 937 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Segment assets </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 67,095 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,020 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 11,855 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 80,970 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="50%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom"> 2010 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> RECYCLING </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> WASTE SERVICES </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> OTHER </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> SEGMENT TOTALS </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="11" valign="bottom"> (in thousands) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Recycling revenues </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 334,667 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 334,667 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Equipment sales, service and leasing revenues </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,126 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,126 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Management fees </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,212 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,212 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Cost of goods sold </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (309,481 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (6,239 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (315,720 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Selling, general, and administrative expenses </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (7,469 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (1,016 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (5,252 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (13,737 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Segment profit (loss) </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 17,717 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 1,083 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> (5,252 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> 13,548 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="50%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom"> 2010 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> RECYCLING </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> WASTE SERVICES </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> OTHER </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> SEGMENT TOTALS </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="11" valign="bottom"> (in thousands) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Cash </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,258 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,210 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,468 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Accounts receivable, net </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 24,933 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,140 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,376 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 27,449 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Inventories </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 34,222 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 89 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 34,311 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Net property and equipment </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 25,799 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,228 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 527 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 27,554 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Goodwill </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,840 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 6,840 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Net intangibles </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 5,775 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 5,775 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Other assets </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 574 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 86 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,105 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,765 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Segment assets </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 99,401 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 2,543 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 4,218 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 106,162 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="50%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom"> 2009 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> RECYCLING </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> WASTE SERVICES </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> OTHER </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> SEGMENT TOTALS </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="11" valign="bottom"> (in thousands) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Recycling revenues </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 171,841 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 171,841 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Equipment sales, service and leasing revenues </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,116 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,116 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Management fees </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 7,095 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 7,095 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Cost of goods sold </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (154,482 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (6,277 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (160,759 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Inventory adjustment for lower of cost or market </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Selling, general, and administrative expenses </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (6,280 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (1,333 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (2,875 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (10,488 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Segment (loss) profit </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 11,079 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,601 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> (2,875 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 9,805 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="50%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom"> 2009 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> RECYCLING </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> WASTE SERVICES </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> OTHER </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> SEGMENT TOTALS </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="11" valign="bottom"> (in thousands) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Cash </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 531 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 182 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 713 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Accounts receivable, net </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 7,520 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 981 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 11 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 8,512 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Inventories </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 26,315 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 112 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 26,427 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Net property and equipment </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 23,577 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,341 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,077 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 26,995 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Goodwill </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,567 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,567 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Net intangibles </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Other assets </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 586 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 22 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 852 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,460 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Segment assets </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 61,096 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 2,456 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 3,122 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 66,674 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table>

NOTE 13 – PURCHASE OF INVENTORY, FIXED ASSETS, AND INTANGIBLE ASSETS OF VENTURE METALS, LLC On January 13, 2009 we entered into an inventory purchase agreement with Venture Metals, LLC (“Venture”), a metal recycler focused on stainless steel and high temperature alloys, and its members, Steve Jones, Jeff Valentine and Carlos Corona, under which we agreed to pay to Venture $8.8 million for inventory comprised of stainless steel and high temperature alloys, which we verified as to weight. Mr. Corona is our employee. We funded the purchase of the inventory through our line of credit with Branch Banking & Trust (“BB&T”). We subsequently paid an additional $262.3 thousand for inventory after the final verification of weight. This initial transaction was part of an overall agreement to acquire the operations of Venture. Under the agreement, we had the right to retain the use of the property located at 3409 Camp Ground Road, Louisville, Kentucky, the site of the Venture business that Venture leases from Luca Investments, LLC (“Luca”), an affiliate of Venture, owned 50.0% each by Messrs. Jones and Valentine. We had the right to use the facilities located on those premises for a period not to exceed two years from the date of the agreement for a monthly rental of $15.0 thousand. On April 13, 2009, we exercised our option to purchase fixed assets under an installment purchase agreement with Venture, whereby Venture sold all of its fixed assets, located at 3409 Camp Ground Road, Louisville, Kentucky, to us by virtue of an installment purchase agreement effective February 11, 2009. Steve Jones, Jeff Valentine and Carlos Corona were the sole members of Venture. Under the notice of exercise of option to purchase fixed assets we agreed to purchase the fixed assets on April 17, 2009 for the purchase price of $1.5 million less the aggregate amount of all rent we paid to Venture under the previous agreement. The installment payment we owed to Venture was $15.0 thousand per month commencing March 1, 2009 with a pro-rata amount paid for the period from February 11, 2009 through February 28, 2009. A further description of the installment purchase agreement and related transactions is contained in Items 1.01 and 2.01 of Form 8-K for the event dated February 11, 2009, as filed on February 18, 2009, with the Securities and Exchange Commission by us. At the time of the consummation of the option to purchase fixed assets, the installment purchase agreement terminated. In connection with the exercise of the option to purchase, Venture had to satisfy outstanding obligations with respect to the fixed assets owed to a number of creditors. The fixed assets include equipment such as cranes, loaders, scales, forklifts, computers, including computer software, furniture and certain leasehold improvements to the property at 3409 Camp Ground Road, Louisville, Kentucky. We completed the acquisition of the real property at 3409 Camp Ground Road, Louisville, Kentucky, from Luca on April 2, 2009. Under the agreement, we purchased the property and improvements thereon consisting of 5.67 acres with a 7,875 square foot building located thereon. We paid $2.1 million for the property, comprised of $1.3 million in cash and 300,000 shares of ISA common stock priced at the per share NASDAQ last sale price of $2.67, as quoted on NASDAQ at 10:30 a.m. (EDT) on April 2, 2009. We determined the purchase price for the real estate based on internal analyses as to the value of the property. BB&T provided credit to us under our $10.0 million line of credit with BB&T funding the cash portion of the purchase price. Although the above transactions were not completed simultaneously due to timing constraints relating to verification of inventory, fixed asset appraisals, property appraisals, and funding considerations, management’s intention from the initial transaction was to purchase the operations of Venture. As the above transactions were completed within the one-year measurement period according to ASC Topic 805, we have treated these combined transactions as an acquisition (the “2009 Acquisition”) and have followed FASB’s authoritative guidance on business combinations for reporting purposes. Accordingly, the results of operations of the acquired business have been included in the consolidated statement of income since January 2009. With this acquisition, we did not obtain control of Venture, as we did not have any financial interest, variable financial interest, voting interest or shares in Venture, not did we have or obtain a non-controlling interest in Venture. The initial purchase price was allocated based on the information available to management and Venture at the time. Management engaged a third party appraiser to determine the fair value of the property and equipment acquired. Subsequent to the completion of this process, we recorded an adjustment to the purchase price allocation amounting to $2.0 million. Goodwill resulting from this purchase relates to the name recognition of Venture Metals, LLC in the industry as well as synergies expected from the business combination. Any adjustments made to provisional amounts are based on new information obtained about the facts and circumstances that existed as of the acquisition date. The following table summarizes the purchase price allocation in thousands: <table border="0" cellspacing="0" cellpadding="0" width="83%" align="center"> <tr style="FONT-SIZE:1PX"> <td width="47%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="11%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="11%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="11%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Original </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Adjustment </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Final </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Inventory </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 9,109 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 9,109 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Equipment, furniture and fixtures </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,499 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (474 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> 1,025 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Property and improvement </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,067 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (1,533 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 534 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Goodwill </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,007 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,007 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 12,675 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 12,675 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Less: Amount paid with stock </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (800 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (800 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Cash consideration </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 11,875 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 11,875 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> On March 26, 2010, we entered into an agreement dated July 1, 2010, subject to shareholder approval of certain issuances of shares of our common stock. After shareholder approval of the issuance of 300,000 shares of our common stock, on July 1, 2010, we entered into an asset purchase agreement and a non-compete agreement with Venture. Pursuant to the asset purchase agreement dated July 1, 2010, in consideration for the transfer of the Venture Metals, LLC name and entry into the Non-Compete Agreement, we delivered to Venture 300,000 shares of our common stock based on a price of $10.41 per share (the “Purchase Price”) based on the stock price on July 1, 2010. Management determined that the purchase of these intangibles would protect our market position and customer and supplier relationships and also constitutes a separate business acquisition under ASC Topic 805 (the “2010 Acquisition”). The purchase price was negotiated between us and Steve Jones, former co-owner of Venture. After purchasing Mr. Corona’s share of Venture on January 1, 2010, Venture was owned by Steve Jones and Jeff Valentine, both of whom were our employees at the time. An outside financial consultant also assessed the transaction to provide an opinion of the fair value of the transaction, which led to a supplemental acquisition dated July 1, 2010, as described below. The material terms of the Non-Compete Agreement include that (i) Venture, or any entity that Venture may become, operating under any name agrees that for a period of five (5) years from the date of the Agreement (the “Non-Competition Period”), Venture will not directly or indirectly (a) engage in any business which is the same or substantially the same as any business of the Company (the “Restricted Business”), or (b) have any interest in any other business venture, whether as a debt or equity holder, member, manager, partner, agent, security holder, consultant or otherwise, that directly or indirectly is engaged in the Restricted Business, within one hundred (100) direct miles of any geographic area in which the Company, its affiliates or any of their respective subsidiaries, engages in the business operations as of the date hereof (the “Restricted Area”); (ii) during the Non-Competition Period, Venture will not, directly or indirectly, (a) solicit for employment or employ (or attempt to solicit for employment or employ), for Venture or on behalf of any other person (other than the Company or any of its respective subsidiaries), or (b) otherwise encourage any such employee to leave his or her employment with the Company, its affiliates or any of their respective subsidiaries; (iii) during the Non-Competition Period, Venture shall not, directly or indirectly, (a) solicit, call on, or transact or engage in the Restricted Business with (or attempt to do any of the foregoing with respect to) any customer (e.g.: North American Stainless), distributor, vendor, supplier or agent with whom the Company, its affiliates or any of their respective subsidiaries shall have dealt, or that the Company, its affiliates or any of their respective subsidiaries shall have actively sought to deal, for or on behalf of Venture or any other person (other than the Company, its affiliates or any of their respective subsidiaries) in connection with the Restricted Business or (b) encourage any such customer, distributor, vendor, supplier or agent to cease, in whole or in part, its business relationship with the Company, its affiliates or any of their respective subsidiaries; and (iv) if Venture breaches the terms of this Agreement, the Company will be entitled to the following remedies: (a) damages from Venture; (b) to offset against any and all amounts owing to Venture under the Asset Purchase Agreement any and all amounts which the Company claims under the Agreement; (c) in addition to its right to damages and any other rights it may have to obtain injunctive or other equitable relief to restrain any breach or threatened breach or otherwise to specifically enforce the provisions of this Agreement, it being agreed that money damages alone would be inadequate to compensate the Company and would be an inadequate remedy for such breach; and (d) the rights and remedies of the parties to the Agreement are cumulative and not alternative. On June 16, 2010, the Company and Venture agreed to a supplemental acquisition, the 2010 Acquisition, dated July 1, 2010. Pursuant to this agreement, on April 12, 2010, the Company paid Venture $1.3 million for the benefit of Messrs. Jones and Valentine using the line of credit. This amount represents an annual performance bonus in cash equal to seven and one-half percent (7.5%) for both Mr. Jones and Mr. Valentine of the amount determined, for the 2009 fiscal year of the Company, by (i) the Segment profit of the 2009 Acquisition (the “Alloys Segment Profit”) minus (ii) the product of (a) the selling, general and administrative expenses under the Other category, times (b) the percentage determined by dividing the Alloys Segment Profit by the Segment profit under the Segment Totals category, all as reflected in the Segment Information note of the Notes to Consolidated Financial Statements as contained in the 2009 Annual Report on Form 10-K. The amount was accrued in 2009 by expensing the calculated amount monthly throughout 2009 to bonus expense in the Recycling segment’s SG&A expenses. On July 1, 2010, the Company issued to Venture 300,000 shares of Common Stock, in exchange for Venture’s customer list, the Venture name, Venture’s execution of a non-compete agreement, and Venture’s agreement to cause Mr. Jones and Mr. Valentine to provide the company with non-compete agreements. Based on an independent appraisal, the Company agreed to deliver up to an additional 750,000 shares of ISA Common Stock in accordance with the following:                     (a) Venture would receive up to ninety thousand (90,000) shares of ISA common stock per annum commencing in 2011 for calendar year 2010, and thereafter in 2012, 2013, 2014, and 2015 for calendar years 2011, 2012, 2013, and 2014, respectively, resulting in a maximum of four hundred and fifty thousand (450,000) shares of ISA common stock over such period (but in no event greater than 90,000 shares in any one calendar year) based on satisfaction of certain RONA criteria. Such consideration would be payable in the form of ISA common stock in one delivery of a stock certificate, as soon as practicable following December 31, 2014 subject to applicable withholding and other taxes and other required deductions;                     (b) Venture would be entitled to receive additional consideration for the purchase of assets up to three hundred thousand (300,000) shares of ISA common stock based on satisfaction of certain 5 year (2010-2014) average RONA criteria. Such consideration would be payable in the form of Company common stock in one delivery of a stock certificate, as soon as practicable following December 31, 2014 subject to applicable withholding and other taxes and other required deductions. The Company obtained a valuation of the intangibles from an outside source. Of the valuation methodologies considered for the valuation of the intangible assets purchased from Venture, the income approach valuation method was used. In this approach, discounted cash flow analysis measures the value of a company by the present value of its estimated future economic benefits. These benefits can include earnings, cost savings, tax deductions, and proceeds from disposition. Value indications are developed by discounting expected cash flows to their present value at a rate of return that incorporates the risk-free rate for the use of funds, the expected rate of inflation and risks associated with the particular investment. The material assumptions used in the valuation include a discount rate range, a long-term growth rate, a working capital rate, and a terminal growth rate range. The valuation also includes income projections and capital expenditure forecasts as provided by management. These assumptions and estimates were based on information available at the time the valuation was performed. These assumptions and estimates bear the risk of change as future performance, future economic conditions, and continued major customer relationships cannot be predicted or guaranteed. Based on preliminary estimates and the share price as of July 1, 2010 of $10.41 per share, we recorded additional goodwill of $4.3 million, decreased the value of the intangible asset by $630.0 thousand, and increased fourth quarter amortization expense related to the intangible assets by $98.7 thousand. We also recorded a commitment of $7.3 million to paid in capital representing the fair value of the contingent consideration associated with the purchase of the intangibles as of December 31, 2010. This commitment value was determined based on management’s estimate that the probability of achieving the RONA criteria was approximately 94%. The maximum value of the contingent shares is $7.8 million based on the $10.41 per share value as of the acquisition date. No changes were made to recorded amounts for goodwill or the other amortized intangible items based on the completion of the valuation in the second quarter of 2011. On February 24, 2011, we issued 45,000 shares of our common stock each to Steve Jones and Jeff Valentine for the satisfaction of certain RONA criteria for the year ending December 31, 2010. We decreased the contingent consideration value to $6.4 million. The Company also obtained a valuation from an outside source to verify our goodwill balance as of December 31, 2011. Of the valuation methodologies considered for the valuation of the goodwill, the income approach valuation method was used. In this approach, discounted cash flow analysis measures the value of a company by the present value of its estimated future economic benefits. These benefits can include earnings, cost savings, tax deductions, and proceeds from disposition. Value indications are developed by discounting expected cash flows to their present value at a rate of return that incorporates the risk-free rate for the use of funds, the expected rate of inflation and risks associated with the particular investment. The material assumptions used in the valuation include a discount rate range, a long-term growth rate, a working capital rate, and a terminal growth rate range. The valuation also includes income projections and capital expenditure forecasts as provided by management. These assumptions and estimates were based on information available at the time the valuation was performed. These assumptions and estimates bear the risk of change as future performance, future economic conditions, and continued major customer relationships cannot be predicted or guaranteed. Based on this valuation, no impairment value was recorded to goodwill.

NOTE 14 - LONG TERM INCENTIVE PLAN At our June 16, 2009 annual shareholders meeting, shareholders approved ratification of a long term incentive plan and approved the issuance of additional common shares of our stock. At our June 10, 2010 annual shareholders meeting, the shareholders approved the reservation of 1,200,000 additional shares of our common stock under the plan. The plan makes available up to 2,400,000 shares of our common stock for performance-based awards under the plan. We may grant any of these types of awards: non-qualified and incentive stock options; stock appreciation rights; and other stock awards including stock units, restricted stock units, performance shares, performance units, and restricted stock. The performance goals that we may use for such awards will be based on any one or more of the following performance measures: cash flow; earnings; earnings per share; market value added or economic value added; profits; return on assets; return on equity; return on investment; revenues; stock price; or total shareholder return. The plan is administered by a committee selected by the Board, initially our Compensation Committee, and consisting solely of two or more outside members of the Board. The Committee may grant one or more awards to our employees, including our officers, our directors and consultants, and will determine the specific employees who will receive awards under the plan and the type and amount of any such awards. A participant who receives shares of stock awarded under the plan must hold those shares for six months before the participant may dispose of such shares. The Committee may settle an award under the plan in cash rather than stock. For performance-based stock awards granted under this plan, we have assumed that the performance targets for awards granted in a specific year will be achieved. We have assumed that performance targets for future years will not be achieved. Based on these assumptions, we use the closing per share stock price on the date the contract is signed to calculate award values for recording purposes. These calculated amounts reflect the aggregate grant date fair value of the stock awards computed in accordance with ASC Topic 718. As of July 1, 2009, we awarded options to purchase 30,000 shares of our stock each to our three independent directors for a total of 90,000 shares at a per share exercise price of $4.23. We recorded expense related to these stock options of $95,071 in 2009. See Note 1 – “Stock Option Plans” of these Notes to Consolidated Financial Statements for additional information on this stock option plan. On January 6, 2010, the Board of Directors granted non-performance based stock awards of 25,500 shares to management at $6.39 per share. On January 11, 2010, we issued 18,000 shares and on February 11, 2010, we issued the remaining 7,500 shares of this grant. On June 8, 2010, we issued 30,000 thousand shares of our stock granted on April 14, 2009 to management at a grant date fair value of $2.53 per share. On November 15, 2010, we issued 5,000 shares of our stock to management at $10.34 per share. In January 2011, we issued 60,000 shares of our stock granted on April 1, 2010 to management at a grant date fair value of $11.93 per share and 600 shares of our stock to consultants at $12.28 per share.

NOTE 15 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="38%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom"> 2011 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 1st </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2nd </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 3rd </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 4th </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Year </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="14" valign="bottom"> (in thousands, except per share information) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="14" valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Revenue </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 106,187 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 64,963 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 55,766 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 49,954 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 276,870 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Gross profit (loss) </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 7,835 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 4,182 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (1,030 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> 717 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 11,704 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Inventory write-down </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (3,441 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> (3,441 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> </tr> <tr> <td valign="bottom"> Income (loss) before other income (expense) </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 4,055 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,610 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (7,165 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (2,957 </td> <td valign="bottom"> ) </td> <td valign="bottom"> $ </td> <td valign="bottom"> (4,457 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Net income </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,167 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 313 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (4,536 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (1,825 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> (3,881 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> </tr> <tr> <td valign="bottom"> Basic earnings (loss) per share </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 0.31 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 0.05 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> (0.67 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (0.26 </td> <td valign="bottom"> ) </td> <td valign="bottom">   </td> <td valign="bottom"> (0.56 </td> <td valign="bottom"> ) </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Diluted earnings (loss) per share </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 0.31 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 0.05 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (0.67 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (0.26 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> (0.56 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> </tr> </table> After a strong first quarter in 2011, sales to our main stainless steel customer began to decline as compared to 2010 due to a decline in demand for stainless steel. Additionally, reduced metal prices caused us to adjust our inventory levels by $3.4 million to lower of cost or market at the end of the third quarter. <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="38%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom"> 2010 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 1st </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2nd </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 3rd </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 4th </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Year </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="14" valign="bottom"> (in thousands, except per share information) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="14" valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Revenue </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 74,169 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 92,815 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 76,550 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 99,471 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 343,005 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Gross profit </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 6,283 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 7,754 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 7,369 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 5,879 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 27,285 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Income before other income (expense) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 3,082 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 4,189 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 3,485 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,792 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 13,548 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Net income </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,763 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,347 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,923 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,020 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 8,053 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Basic earnings per share </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 0.27 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 0.36 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 0.28 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 0.30 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1.22 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Diluted earnings per share </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 0.27 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 0.36 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 0.28 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 0.29 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1.21 </td> <td valign="bottom">   </td> </tr> </table> <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="38%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom"> 2009 </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 1st </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 2nd </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 3rd </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> 4th </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> Year </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="14" valign="bottom"> (in thousands, except per share information) </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td colspan="14" valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Revenue </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 24,250 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 39,124 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 79,970 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 37,708 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 181,052 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Gross profit </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 3,985 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 4,151 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 6,514 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 5,643 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 20,293 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Income before other income (expense) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,275 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 1,711 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 3,907 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 2,912 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 9,805 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Net income </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 654 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 922 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 2,161 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 1,548 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 5,285 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Basic earnings per share </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 0.12 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 0.17 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 0.37 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 0.24 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> 0.91 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom"> Diluted earnings per share </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 0.12 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 0.17 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 0.37 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 0.24 </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> 0.91 </td> <td valign="bottom">   </td> </tr> </table> Shredder production began in the third quarter of 2009, significantly increasing revenues in the first and second quarters of 2010 as compared to the first and second quarters of 2009. Historically, fourth quarter revenue has decreased; however, in the fourth quarter of 2010, a major customer increased their stainless steel orders by $57.4 million as compared to the fourth quarter of 2009. Depreciation expense that was taken in the first three quarters of 2009 in the amount of $68.4 thousand related to the acquisition of the Venture Metals, LLC was adjusted as a result of finalizing the purchase price allocation resulting in a reduction of depreciation expense in the fourth quarter of 2009.

<table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="100%" valign="top">   </td> </tr> <tr> <td valign="top"> S<a id="c68719a007_v1" name="c68719a007_v1"></a>UPPLEMENTARY INFORMATION </td> </tr> <tr> <td valign="top">   </td> </tr> <tr> <td valign="top"> INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES </td> </tr> <tr> <td valign="top"> S<a id="c68719a008_v1" name="c68719a008_v1"></a>CHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 2011, 2010 and 2009 </td> </tr> <tr> <td valign="top">   </td> </tr> <tr> <td valign="top"> <hr size="1" width="100%" noshade="noshade" /> </td> </tr> </table> <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE:1PX"> <td width="50%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="3%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> <td width="8%" valign="bottom">   </td> <td width="1%" valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Description </td> <td valign="bottom">   </td> <td nowrap="nowrap" colspan="2" valign="bottom"> Balance at Beginning of Period </td> <td nowrap="nowrap" valign="bottom">   </td> <td nowrap="nowrap" colspan="2" valign="bottom"> Additions Charged to Costs and Expenses </td> <td nowrap="nowrap" valign="bottom">   </td> <td nowrap="nowrap" colspan="2" valign="bottom"> Deductions * </td> <td nowrap="nowrap" valign="bottom">   </td> <td nowrap="nowrap" colspan="2" valign="bottom"> Balance at End of Period </td> <td nowrap="nowrap" valign="bottom">   </td> </tr> <tr> <td valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td colspan="2" valign="bottom"> <hr size="1" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Allowance for doubtful accounts 2011 (deducted from accounts receivable) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 100,000 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 100,000 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Allowance for doubtful accounts 2010 (deducted from accounts receivable) </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 100,000 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 100,000 </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Allowance for doubtful accounts 2009 (deducted from accounts receivable) </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 490,000 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> (390,000 </td> <td valign="bottom" style="background-color: #E5FFFF;"> ) </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> 100,000 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Accrual for legal settlements for 2011 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom" style="background-color: #E5FFFF;"> Accrual for legal settlements for 2010 </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> <td valign="bottom" style="background-color: #E5FFFF;"> $ </td> <td valign="bottom" style="background-color: #E5FFFF;"> — </td> <td valign="bottom" style="background-color: #E5FFFF;">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom"> Accrual for legal settlements for 2009 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 990,000 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> 990,000 </td> <td valign="bottom">   </td> <td valign="bottom"> $ </td> <td valign="bottom"> — </td> <td valign="bottom">   </td> </tr> <tr> <td valign="bottom">   </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom"> <hr size="3" width="100%" noshade="noshade" /> </td> <td valign="bottom">   </td> </tr> </table> * Uncollected amounts written off, net of recoveries

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NOTES PAYABLE TO BANK

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Text Block]

NOTE 3 - NOTES PAYABLE TO BANK

On March 2, 2012, Industrial Services of America, Inc. and ISA Indiana, Inc. (the “Companies”) entered into a Third Amendment to Credit Agreement (the “Third Amendment”) with Fifth Third Bank (the “Bank”) which amended the July 30, 2010 Credit Agreement (the “Credit Agreement”), including the First Amendment to Credit Agreement dated as of April 14, 2011 (the “April Amendment”) and the Second Amendment to Credit Agreement dated as of November 16, 2011 (the “November Amendment”), as follows. The Third Amendment redefines the calculation period for the purpose of measuring compliance with our covenant to maintain a ratio of debt to adjusted EBITDA (the “Senior Leverage Ratio”) and a ratio of adjusted EBITDA to aggregate cash payments of interest expense and scheduled payment of principal of not more than 1.20 to 1 (the “Fixed Charge Coverage Ratio”) such that each ratio will be calculated quarterly for the period beginning January 1, 2012 through the end of each quarter of 2012. Prior to the Third Amendment, the ratios were calculated on a rolling 12 month basis. The Third Amendment also changed the Senior Leverage Ratio from 3.5 to 1 in the original Credit Agreement to (i) 4.25 to 1 in the first quarter of 2012, (ii) 3.50 to 1 in the second and third quarter of 2012, and (iii) 3.25 to 1 in the fourth quarter of 2012 and thereafter. The Third Amendment also increased the unused line fee by 0.25% to 0.75% and provided a waiver of the Senior Leverage Ratio and Fixed Charge Coverage Ratio covenant defaults for the quarter ending December 31, 2011, as discussed below. In addition, the Companies also agreed to perform other customary commitments and pay a fee of $10.0 thousand to the Bank.

In our Credit Agreement with the Bank, we agreed to certain covenants, including (i) maintenance of a ratio of debt to adjusted EBITDA for the preceding 12 months of not more than 3.5 to 1 (or, if measured as of December 31 of any fiscal year, 4.0 to 1), (ii) maintenance of a ratio of adjusted EBITDA for the preceding twelve months to aggregate cash payments of interest expense and scheduled payment of principal in the preceding 12 months of not less than 1.20 to 1, and (iii) a limitation on capital expenditures of $4.0 million in any fiscal year. As of December 31, 2011, we were not in compliance with the covenants in (i) and (ii) above due to decreased sales relating to decreased demand in stainless steel in the last three quarters of the year. As of December 31, 2011, our ratio of debt to adjusted EBITDA was 9.31; our ratio of adjusted EBITDA to aggregate cash payments of interest expense and scheduled principal payments was (0.70), and our capital expenditures totaled $2.5 million, which includes $36.6 thousand in deposits on equipment. In connection with the Third Amendment, we received a waiver from the Bank for the year ending December 31, 2011 for failing to meet the ratio requirements for covenants (i) and (ii) above. Pursuant to the Third Amendment, the Senior Leverage Ratio will increase to 4.25 to 1 for the period ending March 31, 2012. The Senior Leverage Ratio will then decrease to 3.5 to 1 for the periods ending June 30 and September 30, 2012 and decrease to 3.25 to 1 for the period ending December 31, 2012 and thereafter. The other covenants will remain the same going forward. As of December 31, 2011, we have $19.9 million under our existing credit facilities that we can use based on the bank waiver received.

On April 12, 2011, we entered into a Loan and Security Agreement with Fifth Third Bank (the “Bank”) pursuant to which the Bank agreed to provide the Company with a Promissory Note (the “Note”) in the amount of $226.9 thousand for the purpose of purchasing operating equipment. The interest rate is five and 68/100 percent (5.68%). Principal and interest is payable in 48 equal monthly installments of $5.3 thousand, each due on the 20th day of each calendar month. Payment commenced on the 20th day of May, 2011, and the entire unpaid principal amount, together with all accrued and unpaid interest, charges, fees or other advances, if any, comes due on or before April 20, 2015. As security for the Note, we have granted the Bank a first priority security interest in the equipment purchased with the proceeds of the Note. As of December 31, 2011, the outstanding balance of this loan was $187.1 thousand.

The following table outlines the notional amounts, in thousands, related to the interest rate swaps as of December 31, 2011:


Notional Amount		Rate

$	4,730		5.89	%
$	2,099		5.65	%
$	457		5.89	%

Our long term debt as of December 31, 2011 and December 31, 2010 consisted of the following:


	2011		2010

	(in thousands)
Revolving credit facility of $40.0 million with Fifth Third Bank. See above description for additional details.	$	20,083	$	35,489

Note payable to Fifth Third Bank in the amount of $8.8 million secured by our rental fleet equipment, our shredder system assets, and a crane. See above description for additional details.		7,015		8,275

Note payable to Fifth Third Bank in the amount of $1.3 million secured by equipment purchased with the proceeds. See above description for additional details.		962		1,271

Loan and Security Agreement payable to Fifth Third Bank in the amount of $227 thousand secured by the equipment purchased with the proceeds. See above description for additional details.		187		—

Note payable to Fifth Third Bank in the amount of $115 thousand secured by the equipment purchased with the proceeds. See above description for additional details.		106		—

Note payable to Paccar Financial Corp. in the amount of $164 thousand secured by one Kenworth truck. Payments are $1,697.68 per month with an effective interest rate of 6.5%. The maturity date under this agreement is September 2011.		—		36

Note payable to ILS for various assets including tractor trailers, trucks and containers. The repayment terms are $20,000 per month for 60 months at a seven percent (7.0%) interest rate. The maturity date under this agreement is August 2012.
		156		376


		28,509		45,447
Less current maturities		1,821		1,824


	$	26,688	$	43,623

The annual maturities of long term debt, in thousands, as of December 31, 2011 are as follows:


2012	$	1,821
2013		26,264
2014		388
2015		36
Thereafter		—


Total	$	28,509

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details

CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Current assets
Cash	$ 2,267	$ 2,468
Income tax receivable	3,967
Accounts receivable – trade (after allowance for doubtful accounts of $100.0 thousand in 2011 and 2010) (Note 1)	17,191	27,449
Net investment in sales-type leases (Note 5)	40	33
Inventories (Note 1)	18,544	34,311
Deferred income taxes (Note 4)	411	942
Prepaid expenses	328	392
Employee loans	6	7
Total current assets	42,754	65,602
Net property and equipment	26,199	27,554
Other assets
Net investment in sales-type leases (Note 5)		40
Notes receivable – related party (Note 6)	45	88
Goodwill (Note 1)	6,840	6,840
Intangible assets, net (Note 1)	5,025	5,775
Other assets	107	263
Total other assets	12,017	13,006
Total assets	80,970	106,162
Current liabilities
Current maturities of long-term debt (Note 3)	1,821	1,824
Accounts payable	10,681	11,406
Income tax payable		2,909
Interest rate swap agreement liability (Note 1)	484	650
Accrued bonuses		1,175
Other current liabilities	331	320
Total current liabilities	13,317	18,284
Long-term liabilities
Long-term debt (Note 3)	26,688	43,623
Deferred income taxes (Note 4)	3,406	3,373
Total long-term liabilities	30,094	46,996
Shareholders’ equity
Common stock, $0.0033 par value: 10,000,000 shares authorized, 7,192,479 and 7,192,500 shares issued in 2011 and 2010, respectively, 6,940,517 and 6,789,917 shares outstanding in 2011 and 2010, respectively	24	24
Additional paid-in capital	18,131	17,852
Retained earnings	20,057	23,938
Accumulated other comprehensive loss	(290)	(353)
Treasury stock at cost, 251,962 and 402,583 shares in 2011 and 2010, respectively	(363)	(579)
Total shareholders’ equity	37,559	40,882
Total liabilities and shareholders’ equity	$ 80,970	$ 106,162

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash flows from operating activities
Net (loss) income	$ (3,881)	$ 8,053	$ 5,285
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	4,517	3,887	2,799
Inventory write-down	3,441
Stock bonus to employees	495	504	60
Stock options to Directors			95
Deferred income taxes	459	(196)	2,899
Provision for doubtful accounts			(390)
Gain on sale of property and equipment	(107)	(281)	(74)
Change in assets and liability
Receivables	10,259	(18,937)	(4,311)
Net investment in sales-type leases	33	28	25
Inventories	12,325	(7,884)	(12,946)
Other assets	226	(67)	(166)
Income tax receivable	(3,967)
Accounts payable	(724)	6,721	982
Accrued bonuses	(1,175)	(339)	1,459
Accrued legal	7	29	(988)
Income tax payable	(2,909)	2,749	(48)
Other current liabilities	5	(92)	(233)
Net cash from (used in) operating activities	19,004	(5,825)	(5,552)
Cash flows from investing activities
Proceeds from sale of property and equipment	183	376	111
Purchases of property and equipment	(2,456)	(3,876)	(1,042)
Deposits on equipment	(37)	(193)	(290)
Payments for shredder system			(6,527)
Acquisition from Venture Metals			(11,875)
Payments from related party	43	41	39
Net cash used in investing activities	(2,267)	(3,652)	(19,584)
Cash flows from financing activities
Payments on capital lease obligation		(21)	(81)
Proceeds from other long-term debt			1,499
Net proceeds from Fifth Third Bank	342	45,034
Payments on Fifth Third Bank debt	(17,280)
(Payments on) Proceeds from note payable to BB&T		(5,000)	5,000
Payments on other BB&T debt		(28,499)	(625)
Payments on other long-term debt		(282)	(1,732)
Proceeds from BB&T			20,684
Net cash (used in) from financing activities	(16,938)	11,232	24,745
Net change in cash	(201)	1,755	(391)
Cash at beginning of year	2,468	713	1,104
Cash at end of year	2,267	2,468	713
Supplemental disclosure of cash flow information:
Cash paid for interest	2,025	1,473	1,096
Cash paid for taxes	3,385	1,946	749
Supplemental disclosure of noncash investing and financing activities:
Common stock issued to acquire real estate			4,000
Common stock issued to acquire intangibles		3,123
Contingent consideration		$ 7,300

CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Allowance for doubtful accounts (in Dollars)	$ 100	$ 100
Common stock, par value (in Dollars per share)	$ 0.0033	$ 0.0033
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	7,192,479	7,192,500
Common stock, shares outstanding	6,940,517	6,789,917
Treasury stock, shares	251,962	402,583

Document And Entity Information (USD $)	12 Months Ended
Document And Entity Information (USD $)	Dec. 31, 2011	Mar. 07, 2012	Jun. 30, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	INDUSTRIAL SERVICES OF AMERICA INC /FL
Document Type	10-K
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		6,940,517
Entity Public Float			$ 48,420,206
Amendment Flag	false
Entity Central Index Key	0000004187
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Dec. 31, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $) In Thousands, except Share data	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2008	$ 21	$ 3,743	$ 10,600	$ (475)	$ (1,548)	$ 12,341
Balance (in Shares) at Dec. 31, 2008	6,442,500				(1,079,562)
Net unrealized income (loss) on derivative instruments, net of tax				137		137
Stock bonuses		37			23	60
Stock bonuses (in Shares)					16,500
Purchase of real estate (3409 Camp Ground Road)		370			430	800
Purchase of real estate (3409 Camp Ground Road) (in Shares)					300,000
Purchase of real estate (7124 & 7200 Grade Lane)	3	3,197				3,200
Purchase of real estate (7124 & 7200 Grade Lane) (in Shares)	750,000
Stock option distribution to Directors		95				95
Net income (loss)			5,285			5,285
Balance at Dec. 31, 2009	24	7,442	15,885	(338)	(1,095)	21,918
Balance (in Shares) at Dec. 31, 2009	7,192,500				(763,062)
Net unrealized income (loss) on derivative instruments, net of tax				(15)		(15)
Stock bonuses		417			86	503
Stock bonuses (in Shares)					60,479
Purchase of intangibles		2,693			430	3,123
Purchase of intangibles (in Shares)					300,000
Contingent consideration		7,300				7,300
Net income (loss)			8,053			8,053
Balance at Dec. 31, 2010	24	17,852	23,938	(353)	(579)	40,882
Balance (in Shares) at Dec. 31, 2010	7,192,500				(402,583)
Net unrealized income (loss) on derivative instruments, net of tax				63		63
Stock bonuses		409			86	495
Stock bonuses (in Shares)					60,600
Venture Metals, LLC - contingent consideration		(130)			130
Venture Metals, LLC - contingent consideration (in Shares)					90,000
Reclass fractional shares purchased after stock split (in Shares)	(21)				21
Net income (loss)			(3,881)			(3,881)
Balance at Dec. 31, 2011	$ 24	$ 18,131	$ 20,057	$ (290)	$ (363)	$ 37,559
Balance (in Shares) at Dec. 31, 2011	7,192,479				(251,962)

Consolidated Senior Funded Debt
(as of the end of the applicable Test Period):

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# 1 Divided by:

Consolidated Adjusted EBITDA

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